Central New York construction -- 1994 and beyond

CNY Business Journal (1994-95), Oct 31, 1994 by Fitting, Beth

Commercial construction is an excellent indicator of improving economic health. Steve Infanti, president of ConTegra, a Syracuse construction firm, says, "Construction brings jobs to construction workers and usually adds jobs to expanding businesses. Construction workers' wages translate into consumer dollars." In addition, new commercial property adds to the community's tax base, easing the burden on residential owners. Sales taxes increase the community's wealth.

At the Greater Syracuse Business Development Center (GSBDC), a non-profit corporation authorized to guarantee U.S. Small Business Administration loans and New York State Job Development Authority loans, numbers and sizes of loans are down slightly in 1994 from 1993, according to Richard Arciero, executive director. The GSBDC, known as a "Certified Development Corporation," is part of the Greater Syracuse Chamber of Commerce and one of two such nonprofit corporations in Onondaga County.

The table below shows loan activity by GSBDC for the years 1988 through the present.

As shown in the 7 year table, the number of loans guaranteed by GSBDC has dropped to half last year's level, as of Oct. 1. The average amount loaned is also below last year's level.

Arciero explains why the local economy has not caught up with the national recovery. "Industry here is extremely diversified." says Arciero. "We went into the recession later, and we will recover later." He contrasts the Central New York economy to Rochester's and Buffalo's, which he says are driven by one large industry: Eastman Kodak in Rochester, the steel industry in Buffalo. "We don't experience the losses, but we don't experience surges of growth, either. It's a more stable economy."

Michael Walsh, assistant district director for economic development of the U.S. Small Business Administration, has more encouraging figures. "For the fiscal year ending Sept. 30, there was a 30-percent increase over the previous year." He agrees, however, that commercial building is down. But he points out that in 1994, SBA's lending authority was increased, and he expects more dollars for 1995.

Walsh says that a new SBA program, called LOWDOC--which stands for "lower documentation," that is, the documentation required of the lending institution--may help increase the number of loans, simply by making it easier for folks to comply with SBA regulations. "It's very popular with banks," claims Walsh. "Under this new program, for loans over $100,000, banks are required to complete only a two-sided page, which they can fax to us, instead of the old multi-page document. 'Ihis is good news for the banks, which have been downsizing just like the rest of us." Due diligence still is required.

New York state's uncertain economy is blamed for the lack of commercial construction. Eugene Armani, president of Armani Plumbing and Heating, says, "We've seen a little improvement. Jobs are smaller than they were in the '80s. But nationally the economy is good. The first increases are being seen in residential construction. Commercial building will follow."

Armani says that, although private businesses do not have the capital to build yet and are reluctant to invest, tax dollars are available for public construction. He points to two main problems with construction today: 1)the political climate, and 2) interest rates. If the prime rate goes up again, construction will slow down.

"We're tackling larger jobs today, because we want to grow, but the market is extremely competitive," says Art Mack, president of A.R. Mack Construction Co., Inc.

Steve Infanti suggests that "contractors have to do more--form limited partnerships, look for investors." But, he says, "Surprisingly, foreign dollars are beginning to come into the Central New York area."

The Young Agency writes bonds nd insurance for local construction. Roy S. ("Terry") Moore, president, says that, by this year, "businesses have done the surgery and are ready to rebuild. They'll do it gradually, however; we won't have 20 bidders on a job as before. In the last three years, contractors have made heavy investments in equipment. Being able to rebuild is the challenge now."

Moore says that the Department of Transportation has a great many jobs out for bid. There is also an increasing amount of public school work: upgrading, expansion, and energy conservation. He says, "We'd like to see higher matgins on jobs, but this will come as contractors get busier." Is there much private work available? "It's not like the '80s, but contractors and owners need to learn to do things differently, use creative financing, alternative sources. Overall, there is a feeling of cautious optimism."

Bart Bush, director of the Syracuse Economic Development Corporation, the City of Syracuse's Certified Development Corporation, says they have had success in financing projects for 1994 for two reasons: 1)the economic atmosphere is better than before; and 2) the Corporation's business-retention team is marketing its services more aggressively.