Real Growth for 2020 Transportation Construction Market, ARTBA Chief Economist Says

he U.S. transportation infrastructure market is expected to grow at least 5 percent next year, according to the annual economic forecast released Dec. 4 by the American Road & Transportation Builders Association (ARTBA).

“The real market growth for 2020 is being fueled by increased transportation investments from federal, state and local governments,” says ARTBA Chief Economist Dr. Alison Premo Black, who conducted the analysis.

Total domestic transportation construction and related-market activity in 2020 should reach $300.4 billion, up from 2019’s $286.5 billion, after adjusting for project costs and inflation.

The transportation construction market grew by 8 percent in 2019 compared to 2018, driven largely by gains in highway, street and pavement work, which grew by $9.6 billion to $73.1 billion.

Airport construction work on runways and terminals increased by less than 1 percent in 2019 but was still at record investment levels.  Strong growth in the subway, light rail and mass transit sector, as well as private railroad investment helped support a strong year for transportation construction activity.

One variable, Black says, is the outlook for the reauthorization of the FAST Act transportation law, due in 2020, and the ability of Congress to find additional revenues to support the Highway Trust Fund (HTF).  Any project delays because states are concerned about whether the next federal surface transportation bill is completed in a timely matter could temper 2020 market growth, Black added.  

Overall, transportation construction market activity is expected to increase or be steady in about half of the states, the ARTBA analysis shows.  Some of the largest markets expected to remain stable or grow include Texas, California, Illinois, New York, Florida, North Carolina, Washington, Minnesota, Michigan, Arizona and Wisconsin.

Black shared her findings during a Dec. 4 webinar for analysts, investors, transportation construction market executives, and public officials.

Other market variables include material prices, increased labor costs and labor shortages in some regions.   

Among the other key Black findings:

Public & Private Highway, Street & Related Construction  

  • The real value of public highway, street and related construction investment by state transportation departments and local governments—the largest market sector—is expected to increase by 6 percent to $77.5 billion after growing 15 percent in 2019.
  • Construction work on private highways, bridges, parking lots and driveways will increase from $69.1 billion in 2019 to $71.8 billion in 2020 and will continue to grow over the next five years as market activity increases in those sectors.

Bridges & Tunnels  

  • The pace of bridge and tunnel construction work stayed flat in 2019 and is forecast to grow by $800 million, or 3 percent, in 2020.  Bridge and tunnel market activity fell slightly from $28.8 billion in 2018 to $28.6 billion in 2019, after adjusting for project costs and inflation. 

Light Rail, Subways, & Railroads 

  • Public transit and rail construction are expected to grow from $23 billion in 2019 to $24.2 billion in 2020, a 5 percent increase. 
  • Subway and light rail investment are expected to reach a new record level, increasing from $10.3 billion this year to $11 billion in 2020.

Airport Runways & Terminals  

  • After growing 34 percent in 2018, airport terminal and related construction work, including structures like parking garages, hangars, air freight terminals and traffic towers, is estimated to increase from $18.5 billion in 2019 to $19.6 billion.
  • Runway work is forecasted to increase from $4.7 billion in 2019 to $4.9 billion in 2020.

Ports & Waterways 

  • The value of port and waterway investment should grow to $3.4 billion in 2020. Construction activity in 2019 was $3.3 billion, up from $2.5 billion in 2018. 

ARTBA’s forecast is based on a series of proprietary econometric models for each mode and analysis of federal, state and local data and market intelligence. The full forecast can be purchased at www.artbastore.org.

Established in 1902, ARTBA represents the U.S. transportation construction industry before Congress, the White House, federal agencies, courts, news media and the general public. 

An extensive review of the ARTBA 2020 Forecast and other related materials will be available in the January issues of all Associated Construction Publications (ACP).

2019 U.S. Capitol Christmas Tree Lit in Special Ceremony

Transported by Kenworth W990 and Wilbanks Trucking Services

After a journey of more than 2,000 miles from New Mexico, the U.S. Capitol Christmas Tree was lit in a special ceremony Wednesday, Dec. 4, on the Capitol’s West Lawn.

The tree was harvested Nov. 6 in New Mexico’s Carson National Forest and transported to Washington, D.C., with a Kenworth W990 operated by Wilbanks Trucking Services in Artesia, New Mexico. The special 60-foot Blue Spruce is decorated with LED lights, along with ornaments made by schoolchildren in New Mexico.

The U.S. Capitol Christmas Tree tour, which began Nov. 11 in Red River, New Mexico, and ended Nov. 24 at Joint Base Andrews in Maryland, made 30 stops for community events while traveling across the nation. Thousands of people saw the tree and the Kenworth W990 during the stops and going down the highway.

U.S. Capitol Christmas Tree Lighting – Wilbanks Trucking Services2

Shown are representatives of Wilbanks Trucking Services, which used a Kenworth W990 to transport the U.S. Capitol Christmas Tree from New Mexico to Washington, D.C.
 
From left are: Josh Garcia, Field Superintendent, and second W990 driver; Nathan Cornil, IT Manager; Shane Phipps, Safety Director; Lance Wilbanks, CEO; Jeremy Rice, Field Superintendent; Brumbach Stephens, Salesman and third W990 driver; and Josh Rice, Terminal Manager & Crane Manager, and first W990 driver. 
 
– Photo courtesy of Paul Feenstra

“It was an honor for Kenworth to provide a truck to transport the U.S. Capitol Christmas Tree for the sixth consecutive year. Thanks to Wilbanks Trucking Services and its drivers for delivering the Tree safely and on-time and playing an important role in this very special tradition and celebration that brings communities together,” said Laura Bloch, Kenworth assistant general manager for sales and marketing.

The Kenworth W990, which is equipped with a 76-inch mid-roof sleeper, also features the PACCAR Powertrain with the PACCAR MX-13 engine rated at 455-hp and 1,650 lb-ft of torque, PACCAR 12-speed automated transmission, and PACCAR 40K tandem rear axles. The truck is also specified with the W990 Limited Edition interior, premium Kenworth GT703 seats and audio system, Kenworth Nav+HD, predictive cruise control, 1800W inverter, 180-degree swivel passenger seat, and Kenworth TruckTech+® Remote Diagnostics. 

This year’s theme was “Delivering Enchantment!” On the side of the Kenworth W990 hood, the graphics wrap showcased New Mexico’s state flag, along with Ship Rock, a 7,177 foot-high mountain rock that resembles a 19th century clipper ship. On the door and sleeper, the U.S. Capitol Building was shown with a Christmas tree, with the wording: “From the Land of Enchantment to Enchanting the Nation” written above the graphics. 

The tradition of the U.S. Capitol Christmas tree started in 1964 by then-U.S. Speaker of the House John W. McCormack, who planted a live tree on the Capitol lawn. That tree lived three years before succumbing to wind and root damage. In 1970, the Capitol Architect asked the U.S. Forest Service to provide a Christmas tree. Since then, a different national forest has been chosen each year to provide “The People’s Tree.” 

Kenworth is The Driver’s Truck. See what drivers are saying at www.kenworth.com/drivers.

Rental Hall of Fame inductees announced

Two industry veterans will become the newest inductees into the Rental Hall of Fame. Charles Neffle and Thomas Fouts will be formally inducted on Feb. 9, 2020, at The ARA Show in Orlando, Fla.

Each year, the American Rental Association (ARA) honors individuals who have made a significant impact on the equipment and event rental industry at the national or international level. Charles Neffle and Thomas Fouts will be formally inducted during a ceremony on Feb. 9, 2020, at The ARA Show™ in Orlando, Fla.

ARA created the Rental Hall of Fame in 2000 to foster an appreciation of the historical development of the equipment and event rental industry and the leaders who helped the industry grow and expand. Each year, nominations are accepted to recognize individuals who have made a substantial contribution to the industry.

Here is more information on the newest inductees:

Charles Neffle, All Occasions Event Rental, Cincinnati, Ohio

Charles Neffle’s active service to ARA began in 1995 when he served on the Advertising and Marketing Committee. In the coming years, there was no committee that he wasn’t part of. He moved on to serve on the ARA board, ultimately serving as ARA president in 2001-2002. During his tenure on the board, he was instrumental in the development of the Certified Event Rental Professional (CERP) program, assisting in the selection of ARA’s third CEO and the development of a strategic plan for the association.

After serving as president, Neffle went on to chair the ARAPAC Council from 2004-2006, serve on the ARA Insurance Limited board from 2007-2009 and chair the ARA Foundation board of trustees in 2009-2010.

Neffle was honored with the Meritorious Service Award in 1996 and the Distinguished Service Award in 2004. He was recognized with the ARA Foundation Loyal Donor Recognition Award in 2005 and the ARA Foundation James Keenan Award in 2007.

Today, Neffle serves as chair of All Occasions Event Rental. The company recently celebrated its 40th anniversary.

Thomas Fouts, Bledsoe Rentals, Lees Summit, Missouri
Tom Fouts began working in rental in 1970 and attended his first ARA convention in 1973 where he decided to make the rental industry his career.

Fouts has been dedicated to promoting the equipment and event rental industry and ARA on local, state and national levels throughout his 49-year career in the industry. He was an officer on the ARA board for five years and has served on more than 20 local and national committees and boards. 

During his tenure on the Education Committee, he helped develop education, safety and management training systems and the “Making It Work” video training series. These paved the way for many Rental U courses in the areas of rental store management and day-to-day operations. He also helped develop the RenTech educational programs during a three-year term as chair of the General Tool Shared Interest Group. 

In 2002, Fouts presented “Operation ID,” which he structured to create “Intentional Development” of leadership for local and state associations. The program was presented at multiple ARA Leadership Conferences for local and state associations to recognize strengths and weaknesses, identify individuals with leadership potential and develop processes to support stronger associations. 

Following his service on the ARA Board, Fouts served on the Rental Management Advisory Board and also served on and co-chaired the ARA Insurance Services Captive Board. Fouts has attended ARA’s National Legislative Caucus more than 20 times. On the local level, he worked to eliminate personal property tax on rental equipment and was successful obtaining stronger theft of services legislation. 

Today, Fouts serves as chair of Bledsoe Rentals and as the coordinator of the ARA Past Presidents group. 

About ARA: (www.ARArental.orgThe American Rental Association, Moline, Ill., is an international trade association for owners of equipment and event rental businesses and the manufacturers and suppliers of construction/industrial, general tool and party/event rental equipment. ARA members, which include more than 11,000 rental businesses and more than 1,000 manufacturers and suppliers, are located in every U.S. state, every Canadian province and more than 30 countries worldwide. Founded in 1955, ARA is the source for information, advocacy, education, networking and marketplace opportunities for the equipment and event rental industry throughout the world.

AEM Announces Advocates Program Award Winners

The Association of Equipment Manufacturers (AEM) announced the 2019 recipients of its annual Advocates Program awards, which recognize outstanding commitment by AEM members to industry advocacy efforts. 

This year, 25 member companies received AEM Advocates Program Gold awards for achieving the highest level of participation in grassroots advocacy.

In addition, one company – Weiler – received the Advocates Program’s highest honor, the Pillar of the Industry award, for reaching Gold status for five consecutive years.

 “These companies are helping lead the way for our advocacy efforts and we want to publicly thank them for their outstanding commitment and participation,” said AEM President Dennis Slater. “They are on the front lines as we educate lawmakers on the importance of the off-road equipment industry and manufacturing to local economies and quality of life throughout America.”

The AEM Advocates Program recognizes and celebrates AEM member companies that help advance the industry’s policy priorities through various advocacy efforts, including participating in the association’s grassroots advocacy program, I Make America

I Make America is AEM’s signature program building grassroots support and advocating for pro-manufacturing policies that create and sustain jobs across America.

“Through our advocacy efforts and the strong participation of our member companies, the association is building valuable relationships with elected officials and advancing the industry’s policy priorities through pro-manufacturing legislation,” said AEM Senior Vice President of Government and Industry Relations Kip Eideberg. “We have scored many important wins this year, and this is in large part due to the efforts of the 1.3 million men and women of our industry. We are grateful for their ongoing support and engagement.”

AEM presented the Advocates Program awards at its recent annual conference of member companies. Learn more about AEM at www.aem.org.   

2019 Pillar of the Industry Award Winner

  • Weiler

2019 Gold Award Winners

  • AGCO Corporation
  • Blount International
  • Calder Brothers Corporation
  • Caterpillar Inc.
  • CLAAS of America, Inc.
  • CNH Industrial
  • Cummins Inc.
  • Custom Products of Litchfield, Inc.
  • Deere & Company
  • Doosan Bobcat
  • Dynapac North America LLC
  • General Kinematics
  • HCC Inc.
  • JLG Industries Inc.
  • Kinze Manufacturing Inc.
  • Komatsu America Corp.
  • Kondex Corporation
  • Kuhn North America Inc.
  • Manitowoc Crane Group
  • Stellar Industries Inc.
  • Superior Industries
  • Trimble Inc.
  • Vermeer Corporation
  • Volvo Construction Equipment
  • VT LeeBoy Inc.

For more information about I Make America, please visit www.imakeamerica.com .          

About AEM
AEM is the North American-based international trade group representing off-road equipment manufacturers and suppliers, with more than 1,000 companies and more than 200 product lines in the agriculture and construction-related industry sectors worldwide. The equipment manufacturing industry in the United States supports 1.3 million jobs and contributes roughly $159 billion to the economy every year.

ESOPs as an Exit Strategy for Owners of Construction Companies

By Chris Hirschfeld, ASA, MBA, Director of Exit Planning, Somerset CPAs and Advisors

Running a profitable business is a daily challenge for most business owners. Finding an exit strategy is a challenge that every business owner will eventually face. It is especially true for many in the construction industry. If you want to sell to management, how often do they have the funds to buyout the owner? If you want to arrange bank financing for a transaction, what impact will this have on your bonding? If you want your children to remain in the business, how willing is a buyer to honor that request? If you consider selling to a competitor, what is the risk of sharing proprietary information with your competition? What if the deal doesn’t go through? How often do Private Equity firms even look at construction companies for their portfolio of acquisitions?

The list of issues above is exactly why more and more construction companies are turning to ESOPs as an exit strategy. What is an ESOP? It stands for Employee Stock Ownership Plan. It is a vehicle by which business owners can sell their stock to the employees through an ESOP Trust. The ESOP Trust buys the shares for the benefit of all employees. Not only does it provide an exit strategy for the current owners, but it also creates an ownership mentality among all the employees because all employees will have an economic interest in the success of the business. 

An ESOP is a qualified retirement plan. Therefore, it is governed by the same rules that apply to other retirement plans such as 401k or SEP or SIMPLE IRA’s. ESOP plan documents will specify eligibility, vesting, and retirement ages, just like other retirement plans. The accumulation of value inside an ESOP grows tax deferred, just like all other retirement plans. Employees only pay ordinary income tax when they withdraw their funds from their ESOP account just like any other retirement plan. When employees retire, or leave the company for any reason, however, they must sell their stock back to the ESOP. The stock never leaves the company. The terminated employee may roll their cash proceeds into their IRA or 401k if they wish to further defer taxes on their ESOP account after retirement. The one thing that makes an ESOP unique among retirement plans is that, by law, ESOPs are allowed to hold employer stock as its only security. 

When setting up an ESOP, current owners must sell their stock at fair market value, as derived by an independent appraiser. This is a market-based price which gives owners a value comparable to what the current market would bear. Often, “fair market value” is a higher price than formulas many companies have in place within their buy-sell agreements. Once the owners sell their shares to the ESOP, the ESOP Trust will allocate shares to employees over several years. This creates a long-term incentive for employees to remain with the company. It is why ESOPs have become such a wonderful retention tool. It is like a “golden handcuff” for all employees. If they leave, employees lose their unvested balance and also walk away from the potential of future share allocations. 

One of the biggest benefits to ESOP-owned companies is that management does not have to change. Corporate governance does not have to change. The day-to-day operations do not change. The company remains local. Headquarters will not be moved out of state. The local community benefits when companies don’t sell to out-of-state companies. There is one additional benefit to the owners who sell their shares to the ESOP. If they remain employees after selling their stock, they may also participate in the ESOP to build additional wealth.

In today’s tight labor markets, ESOPs are especially attractive. Imagine being in competition for new hires. Your company can offer not only salary, wages, and a 401k plan, but also a second retirement plan that the company contributes to (not the employee). How many employers offer two retirement plans? This will make your company more attractive to potential new hires in a tight labor market.

What types of companies make good ESOP candidates? ESOP candidate companies should be profitable, with stable earnings and some growth potential. If the company has the capacity to borrow money, the selling shareholders can get more cash up front as part of the deal. Owners who want to keep the company local will find ESOPs attractive. If you already have an employee-ownership culture, your employees will treasure the ESOP benefits.

ESOPs are only available to corporations. LLCs and Partnerships would have to convert to either an S-Corporation or C-Corporation before forming an ESOP. One of the advantages of a C-Corporation that forms an ESOP is that the sellers can get tax deferral on their capital gains if the ESOP buys 30 percent or more of the ownership. One of the advantages of an S-Corporation forming an ESOP is that income taxes on corporate profits can be eliminated. S-Corporations do not pay a corporate income tax. Corporate income passes through to the shareholders who pay the tax. If an S-Corporation is owned 100 percent by an ESOP, the corporate income tax liability passes through to the ESOP, which is a qualified retirement plan. Qualified retirement plans pay no income tax. Therefore, a 100 percent ESOP-owned S-Corporation is a tax-free entity. Imagine not having to make income tax distributions equal to 30 to 35 percent of the corporate income each year or in quarterly installments. That cash can be retained and used for other corporate purposes (pay down debt, bonuses, acquisitions, etc.).

The company will incur added expenses to an ESOP. ESOPs require a trustee, an independent business appraiser (who appraises the stock each year for the benefit statements), and legal counsel. Additionally, a record-keeper/third-party administrator must be retained to administer the plan, file necessary annual tax forms and produce the employee ESOP benefit statements. The corporate income tax savings alone, however, can more than offset the increased operating costs for an ESOP.

In summary, there are several reasons an ESOP might be an attractive exit strategy for business owners in the construction industry. It allows the owners to sell their stock at a market-based price. It provides a means by which the owners can sell the company, but the company remains local. The ESOP has a built-in mechanism for buying shares when employees leave the company, so there is always a market for minority interests. ESOPs help build an ownership mentality among employees. An ESOP provides a second retirement plan for all employees that builds value over an employee’s career. This additional retirement benefit will make your company unique and creates an attractive recruitment and retention tool. ESOP-owned S-corporations can eliminate corporate taxes altogether, creating a unique source of cash flow unavailable to most other corporations. If you have a business that you would like to turn into a legacy, an ESOP just might be that vehicle.