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56 • January 2015 www.concreteproducts.com STATE, LOCAL FUNDING TO BOOST PUBLIC WORKS Increased federal support to construction activity is not factored into Sullivan's fore- cast; PCA assumes federal support of the high- way program will remain fixed in nominal val- ues. In the context of inflation, this implies a gradually diminishing factor contributing toward public construction. The gradual strengthening in public construction activity, however, does not lie with the federal side of the equation, but instead with the state and local side of the equation. As the economy builds momentum, job gains will add strength to states' ability to spend and rising home prices will eventually support stronger con- struction spending at the local level as well. Both these conditions, however, still have some time to brew before resulting in a sig- nificant positive impact on public spending. Roadway construction accounts for the largest area of public cement consumption. While this sector has suffered difficulties, PCA believes a trough point was reached in 2013. Growth is expected to push this sector to record successive gains during the back end of the forecast horizon. According to PCA's sce- nario, roadway construction is tied to a recov- ery in state and local finances. State revenue collections have been increasing in tandem with job creation. This suggests continued strong growth in state revenue collections and an eventual return to surpluses by fiscal 2015. With this, PCA expects an increase in discretionary state construction spending, which was hit hard during the recession. During the 10 years preceding the economic downturn, state highway/road construction discretionary spending accounted for roughly 2.4 percent of total state expenditures. Cut- backs in state discretionary highway/roads spending accounted for only 2.1 percent in 2008, 1.9 percent in 2009, and 1.8 per- cent in 2010. PCA expects the share of state spending dedicated to road construction will increase once state fiscal conditions turn to surpluses. Furthermore, The Transportation Infrastructure Finance and Innovation Act (TIFIA) reaches $1 billion in 2015, compared to $122 million three years ago. The increases in TIFIA funding provide greater ability for state and local governments to finance large- scale construction projects. Sullivan also expects an increase in local spending on public construction beginning in fiscal 2016. While localities receive state and other funding, roughly 75 percent of tax reve- nues are from property tax receipts. Unfortu- nately, property values declined dramatically during 2006-2011, thereby reducing local budgets and construction spending. PCA esti- mates there is a three-year lag between chang- es in home prices and local spending activity. On a national basis, home prices began recording sustained gains in mid-2012. This implies an increase in local spending activ- ity could begin in mid-2015 (fiscal 2016). Furthermore, analysis suggests that munici- palities have gradually increased the mileage rates applied to properties. As home prices rise, therefore, there is the potential that localities receive an additional boost to bud- gets via the higher property tax rates. ABC, ARTBA WEIGH IN Associated Builders and Contractors (ABC) forecasts a steady and ongoing economic recovery for the U.S. commercial and indus- trial construction industries in 2015. The reasonably brisk industry recovery in 2014 should continue in 2015. "ABC forecasts nonresidential construc- tion spending will expand roughly 7.5 per- cent next year," said Chief Economist Anirban Basu. "The segments that will experience the largest growth in construction spending in 2015 include power (e.g. natural gas-related construction), lodging (leisure and business spending), office space (professional services employment creation), and manufacturing (rebounding industrial production). "The public sector will see far more slug- gish growth in construction spending," Basu warns. "However, this fits a multi-year pattern with private nonresidential spending exceed- ing public nonresidential spending by 28 per- cent in 2014, up from 15.6 percent in 2013." "There are always issues, of course, includ- ing compensation costs that will rise more quickly per worker next year than in years past," Basu cautions. "This will be particular- ly apparent in areas like Louisiana and North- ern California, places that have experienced significant economic growth recently. Additionally, while material price infla- tion has been suppressed, it may accelerate in 2015. Last year, prices were suppressed due to a combination of factors, such as soft- er growth in most of Europe and Asia, rising energy production in the U.S., and a stronger dollar. Some of these factors might not be as prominent next year, so the stage could be set for price increases close to 3 percent. "Taking into account current economic momentum, especially in the form of employ- ment growth, ongoing accommodative mone- tary policy and increased growth in consumer spending, further stoked by falling gasoline prices, 2015 should be a decent one for the U.S. economy," concludes Basu. "Contractors should continue to experience a lengthening backlog and the industry should continue to see increases in nonresidential construction spending and employment growth." Consistent with the outlook from other economists, the American Road and Trans- FEATURE MARKET OUTLOOK www.scaletron.com 1 800 632 7083 scaletron@scaletron.com Dealers throughout U.S. and Canada Click or visit web sites For details and videos Plants and mixers give higher quality concrete while saving on cement Trouble-free PLC Controls Easy to use, with low maintenance cost Microwave Moisture Meters with new graphic interface Mixer moisture controls optimize your mix, eliminate wasted batches w w w . o c m e r . b i z North America