State forecast

Economic rebound continues despite industrial downturn

By Sam Barnes

The state's construction industry has weathered some serious economic storms in the last three years, while at the same time benefiting from some fortuitous high-dollar projects.

In 2001 two negative forces battered the industry simultaneously.

"First, the national economy entered a recession that spilled over into the Louisiana economy," said Loren Scott, James Richardson and A. M. M. Jamal in the Louisiana Economic Outlook, 2005-06. "Secondly, the very capital-intensive chemical industry began to hunker down in response to high natural gas prices."

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The construction industry as a whole lost 12,000 jobs, or 9.3 percent of its workforce, during 2001-2004.

The Outlook predicts a slight reversal of fortunes in the coming years, with the construction industry gaining 4,300 jobs during 2005-2006.

"Although high natural gas prices were largely responsible for the sector's recent problems, it is those same high prices that will provide a positive jolt going forward," the Outlook reads.

McGraw-Hill Construction's Dodge Analytics Group predicts that the power and utilities market will get the biggest boost in 2005, with construction investment rising by as much as 115 percent; followed by multi-family construction, increasing by 43 percent; dams, water and sewer construction, rising 42 percent, and commercial construction, rising 25 percent.

Key projects to watch are:

• New liquefied natural gas terminals.
  
• Conversion of electricity power units. Cleco Corporation is considering investing nearly $1 billion to retrofit its gas-powered power plants in Rapides and St. Mary parishes into coal-fired plants. Louisiana Generating plans to spend $1.1 billion to expand its coal-fired facility at Big Cajun II.
  
• Refinery work. Some refineries are in the process of re-tooling to reduce the sulfur content of their gasoline, and others are preparing to make major investments to reduce the sulfur content of their diesel under mandated EPA standards.
  
• Highway construction. Highway construction money for the state will rise from $600 million to about $690 million.
  

Other large construction projects include:

• The $300 million New Orleans Convention Center was to begin construction in 2004, but has been delayed by a bidding dispute. It could get underway during 2005-2006.
  
• Dow Chemical is expected to spend $100 million to build a new latex plant in Taft.
  
• Work should begin this year on the $312 million expansion of the Huey P. Long Bridge in New Orleans.
  
• Work began in late 2004 to build a new Union Tank Car plant near Alexandria. The plant will cost about $100 million to build and another $32 million on infrastructure upgrades.
  
• About $220 million in construction projects are scheduled for Fort Polk and England Airpark.

Industrial construction should experience a "slight kick" due to turnaround projects during 2005, said Al Bargas, president of Associated Builders and Contractors' Pelican Chapter in Baton Rouge.

"In 2005 we may see a slight improvement," Bargas added. "I don't see the chemical industry getting markedly better because of the cost of natural gas, so it will be focused on environmental and maintenance type projects."

Although many in the industrial sector have been doing better this year, the relief isn't affording enough confidence to move ahead with expansions, said Connie Fabre, executive director for Greater Baton Rouge Industrial Managers Association.

"Contractors might be seeing more maintenance contracts pick up, possibly some smaller projects they've been holding off on the past couple of years, but I haven't heard of any major projects in the area," she said.

The good news is that several liquefied natural gas projects, about $600 to $800 million each, are slated for Louisiana, said economist Loren Scott.

"Two are underway and several more are almost through the permitting phase," he said. "LSU's Center on Energy Studies says the projects will bring 14,000 associated construction jobs."

Derrell Cohoon, CEO of Louisiana AGC in Baton Rouge, said the commercial sector is seeing some improvement and continues to "sustain the state's economy. It isn't as huge as it has been, but it is still very positive."

Everyone in the industry is still waiting on passage of a new highway bill.

"Once we get a federal highway bill, I think we'll see a lot of improvement," Cohoon said.

Many Transportation Infrastructure Model for Economic Development projects are actually progressing more rapidly because they are funded solely by the state.

"DOTD privatized the program and that is really expediting things," Cohoon said. Through 2008, $2.3 billion have been allocated to projects specifically earmarked to be funded by TIMED.

Metro areas

Alexandria. For perhaps the first time, the Alexandria metro area is the state's biggest success story.

The area is expected to add 3,000 jobs during the next two years.

"The primary driver behind this resurgence will be the new Union Tank Car facility," reads the Louisiana Economic Outlook. "UTC will spend $100 million to construct the facility, and state and local governments will chip in another $32 million for infrastructure improvements." The plant is scheduled to open in 2006.

UTC said it would employ 850 employees at an average annual wage of $40,000 a year. Through the multiplier effect, the plant will support a total of 1,527 direct and indirect jobs in Rapides Parish and will generate about $51.5 million in additional earnings for parish households, according to the Outlook.

England Airpark is in the middle of building a new $24 million terminal that should be completed in mid 2006, and there is another $70 million in construction at the airpark associated airport.

Also, Procter & Gamble is expecting to hire an additional 90 workers at its liquid detergent plant. Associated with the P&G operation is the opening of a PlastiPak Packaging facility that makes plastic bottles for the detergent. PlastiPak will hire about 90 people.

Another new firm adding to the P&G cluster is Integrated Packaging, which modifies cardboard packaging to hold the bottles for the detergent. IP is projected to employ 200 workers during the next three years.

Baton Rouge. Employment in the Baton Rouge area will rise by only 3,500 jobs during the next two years, or an average of only .6 percent a year, according to the Outlook.

"The culprit behind this performance will be a continued weakening in the chemical sector," according to the Outlook. About 600 chemical jobs are expected to be lost in the Baton Rouge area.

The losses in chemical and industrial construction will be offset by some other positive news in the economy:

• Direct General Corporation, a call center, has secured a $1.8 million state to expand its operations in Baton Rouge from 429 to nearly 2,000 employees.
  
• A $45 million high-rise condominium called River Place will break ground this year.
  
• State Farm is consolidating claims workers in Baton Rouge.
  
• The $50 million renovation of the old Capitol House Hotel should begin in downtown Baton Rouge.
  
• Air Products will spend $60 million on a Convent hydrogen plant.
  
• Amitech USA's polymer concrete pipe producing facility is expected to add 100 jobs.
  
• Two new state office buildings are under construction in downtown Baton Rouge.

Houma. The Outlook forecasts about 2,200 news jobs in the Houma area during the next two years.

A minor source of these jobs will be a slight upward movement in the rig count in the area. About 200 new jobs are forecast in the extraction industry during the next two years. The August Mineral Management Service lease sale in the western Gulf attracted 421 bids versus 407 the previous year, and the bid total of $171.4 million was 15 percent higher than the previous year.

"That suggests that there is some hope of an improvement on the extraction front," says the Outlook.

Most of the job growth in the area will come from Bollinger Shipyards.

Lafayette. The Outlook projects about 5,100 new jobs in Lafayette during the next two years, partly attributed to an 800-job increase in the oil extraction sector. This improvement is based on an improved Mineral Management Service lease sale in the western Gulf.

There are some other bright spots on the horizon.
• The area has five new hotels under construction.
  
• The Cingular Call Center will be adding 400 employees.
  
• More than $100 million in construction activity is underway at the University of Louisiana at Lafayette.

Contributing to the vigorous growth rate are Citgo Petroleum, liquefied natural gas plants and a new casino.

Major construction projects either underway or scheduled at Citgo Refinery include a $300 million refinery expansion that will increase capacity by 105,000 barrels per day and a $1.3 billion coke-fired cogeneration facility.

"There are several LNG terminals either under construction or planned in the area, including Southern Union-Trunkline, Sempra Energy, Shell Oil, Cheniere Energy and Excelerate Energy," according to the Outlook.

And Pinnacle Entertainment will open L'Auberge Du Lac Casino early this year. The company is spending $365 million to build the 26-story hotel and casino.

Monroe. The poorest performing metro area in the state, Monroe is expected to lose about 400 jobs in 2005 and gain 300 in 2006.

"The reason for this very pessimistic forecast is the announcement by State Farm that it would totally close its Monroe facility by the fall," says the Outlook "This will eliminate 1,100 jobs at an average annual salary of $42,000 at the site. The firm followed up the announcement with the news that another 75 to 100 jobs would be eliminated at the Monroe claims center."

On the other hand, the following positive impacts are expected:

• The state has provided a grant to Guide Corporation to expand its facility.
  
• There is about $70 million in dormitory construction underway at the University of Louisiana at Monroe.
  
• Entergy has opened a call center with an initial workforce of 50

New Orleans. There are a number of bright spots on the horizon that should give the New Orleans area a boost.

The transportation equipment sector should be an important factor during 2005-2006, according to the Outlook:

• Northrup Grumman Avondale Shipyard has a $20 billion contract to build 91 ocean-going vessels during the next 15 years.
  
• Bollinger Shipyards will construct a 10,000-ton dry dock on the Industrial Canal.
  
• Textron Marine & Land will build 71 new armored security vehicles for the Army and manufacture air-cushioned landing craft for the Navy.
  
• Trinity Marine has signed a $700,000 pact with the state for improvements to its site along the Industrial Canal. The firm will add at least 90 new employees.

There are several significant construction projects planned in the New Orleans area, including a planned $650 million gas-fired electricity generating plant in east New Orleans by Crescent City Power; a $100 million Dow latex facility in Taft; and the $300 million New Orleans Convention Center expansion.

Shreveport/Bossier City. About 2,400 new jobs are projected for the Shreveport/Bossier City area. These additions, the Outlook reads, should come from the following:

• The Answer Group is purchasing and remodeling an old mall for a new call center for the region. The company will initially employ 750 employees and then expand to 1,300.
  
• Beaird Industries will jump from 250 jobs to 400 by mid-year.
  
• General Motors plans to invest about $250 million in its plant to manufacture the Hummer H3. It will add about 300 new jobs.
  
• Red River Pharma has moved into the wet lab science incubator in Shreveport and has started with 20 employees.

The gaming industry also continues to play a significant role in the region's economy.

Useful Source:

For more information about economic development initiatives in Louisiana, go to: http://www.led.state.la.us/