When members of the Associated General Contractors looked at the FW Dodge/McGraw-Hill Construction figures in their July newsletter, they could be forgiven for thinking that the Vermont construction industry was headed for the sub-basement in a hand truck.

Residential construction for May: down 30 percent from the previous year (33 million dollars to 23).Non-residential: down 29 percent (31.6 to 22.5). Non-building (roads, bridges, sewer & water lines, utilities, etc.) down 47 percent - despite State resolves to catch up with deferred maintenance - from 45.8 to 24.2 million. Total construction: down 37 percent. (Just released July figures showed that commercial and housing construction pushed year-to-date figures to a more manageable drop of only 2 percent, even with road-related construction down 50 percent for the year versus 2007. See page 32 for the July data.)

The year-to-date numbers suggested that May had been a particularly bad month, but were still cause for alarm. Nonbuilding was down 60 percent and non-residential was down 16 percent, but residential was up 25 percent - though that could have reflected work being finished from the time before the subprime mortgage and credit crises.

Called for comment, AGC executive director Thom Serrani hastened to say that the June figures, just in, were better.

The most surprising numbers, given that problems with the national housing market brought on the current round of economic weaknesses, were in residential construction. Residential construction shot up in June, totaling $51,820,000 versus $28,958,000 for a 79 percent hike. That put the half-year cumulative figure up to $196,815,000, 38 percent better than the $142,682,000 for the first half of 2007. These numbers were being assembled at about the same time that the national firm RealtyTrac was calculating that residential foreclosures were up 55 percent from a year ago, and that one in every 464 American households had received a foreclosure filing (Reuters). At least that part of the market seemed to bear out the idea that Vermont's economy does not take the national picture as a template.

Nonresidential work had caught up and more, thanks to a $59,244,000 June that was 76 percent better than the previous year's. Cumulatively, the $124,611,000 figure bested the previous year's by 12 percent.

Non-building work, however, was still in a rut. The June total of $12,799,000 was off 25 percent from the year before, and the cumulative total of $218,318,000 undershot 2007's $93,596,000 by 57 percent.

It should be noted here, for the record, that 2008 was by mid-August on a course to have the rainiest summer known, with July already having achieved that dubious distinction in many areas. Nor were these just numerous and heavy rainstorms: thunderstorms with accompanying high winds brought flash flooding with distressing frequency, in some communities adding the burdens of road restoration to those of road maintenance. One example: for a time the mountain town of Ripton had its main connection with the valleys on either side, as east-west Vermont Route 125 washed out in both directions.

The bad weather may have erased whatever construction projects had been planned on farms, with milk prices having been high for most of the past year. Soaked conditions brought seeding failures; damage from funguses and diseases in field crops; piffulous protein quality in forages because fields often couldn't be harvested until the alfalfa, timothy, orchard grass etc. were past their prime; and doubts whether Vermont could cash in on soaring corn prices in areas where clay soils threatened to do to tractors and combines what the La Brea Tar Pits did to mastodons.

Federal emergency aid, which often comes as loans, seemed unlikely to put the State's Road Map to Affordability shiny side up and rubber side down.

Adding up the numbers, 2007 came out ahead of 2008 by 12 percent over the first half of both years. That was another way of saying that $415,022,000 fell short of $472,414,000.

Another perspective came from Works in Progress, a South Burlington firm that reports bidding opportunities to its construction industry clients. They divide projects into Pre-Design (so early that no design team is in place), In Planning (still in an early planning stage but a design team has been selected), and Bidding projects.

Larry Cain said they had seen a drop in the quantity of Pre-Design projects. Their figures showed 2008 to be lower in that regard than 2007, 2006, and 2005.

In Planning projects had shown "a moderate drop" from 2007 to 2008, Cain said. As for Bidding, he said 2008 "has seen a slight decrease" from both 2007 and 2006. He observed that "2003 has the highest quantity of bidding projects of the last five years."

"Many of the contractors I have spoken with either have very little work or enough to be busy now, but with no or very little backlog of projects. I predict the slowest part of 2008 will be winter," Cain said.

"This is typically a slow bid part of the year, but this should hold a more pronounced slowdown," he said. "The hope is that we will start to recover from this slowdown in the spring of 2009. Most contractors I have spoken to are not so sure; many believe we are in for another depressed year with the recovery beginning in the spring of 2010."

Spotty

The rain may fall on all alike, but not microbursts. There was general agreement among sources in different areas of the construction industry - architectural, general contracting, funding - that some companies are doing better than others. No one was complacent; 2008 seems to be time to lean on established and trusted relationships, to find creative ways to keep good employees busy enough, and to expect tough, tight bidding.

There may be a pattern to some extent of mid-level construction companies hurting the worst. Joseph Sinagra, of the Homebuilder and Remodelers of Northern Vermont, and Donald Wells, who heads DEW Construction (Donald E. Wells), said the scenario made sense given what they had seen.

There are small builders with strong local reputations who can keep going doing a house a year. There are large companies that can compete out of state, particularly in areas where they have shown expertise or with large companies who now trust their ability to manage a kind of project (warehouses, for instance) that crops up repetitively.

But there are also companies that ramped up to meet demand when times were good, putting on employees and purchasing machinery, that are now finding it hard to make the payroll and payments. There is an analogy with what has happened in the dairy industry: small farms that can produce milk seasonally "on grass," often with strong organic credentials, can combine low feed costs and access to high-value markets; big dairies with economies of scale and situations that call for highly productive employees likewise have done well. In between, larger family operations are struggling, especially if they face high debt loads from startup costs, machinery replacements, or recovery from disasters.

Before turning to anecdotal accounts, there are two other patterns that should be highlighted. One is the way environmental, sustainable "green building" practices have taken hold almost universally. Spray-on no-cracks insulation, infrared-heat-reflective windows, high-efficiency lighting and fixtures, aren't anything unusual now. The leading edge seems to have shifted to things like small-scale wind and solar systems, or even geothermal generation based on deep wells and heat exchangers. The day may even come when passive solar design - orienting homes to the sun, crafting roof projections that shield windows in the summer but give access to sunlight in the winter - may become something other than a historical artifact of the 1970s Back to the Land movement.

One last pattern: executives in companies that were holding their own or even thriving weren't crowing about it. There seemed to be a collective holding of breath, a worry about what layoffs and business failures could do to people they knew, and a lot of empathy for anyone struggling with the current conditions.

Ace In The Hole, Or Fire In The Hole?

The housing industry is like a lot of the Vermont economy, said Sinagra: it doesn't follow along with national trends as quickly as other places. But there are builders who are having difficulties, he said, and there have been some layoffs.

"People are scared," he said, and the fact that it's an election year has increased their uncertainty. But homeowners need to do maintenance, and sometimes want to renovate if they can't or don't want to move, so the sector isn't moribund, he said.

Environmental concern has apparently become one of the motivations for starting some projects. "Green is the hot word right now," Sinagra said. High-end projects are more likely to include more expensive types of green construction, these days someone who is just having work done on the attic is likely to look into adding a skylight. "I think everyone wants to do something to make it green," he said.

Regional differences are typical in Vermont, with far northern Vermont and the Northeast Kingdom filing a disproportionate number of business bankruptcies month after month. In Danville, at Laferriere Construction, Dennis Laferriere said "It's slow. It's a lean business out there, and that's all there is to it."

"Everybody's worried about paying their bills," he said. "I can understand that. I'm worried about paying my bills."

But in their case, it's the residential market that's letting Laferriere retain good employees. There's also a Laferriere Realty, and, "We're falling back on our realty company to keep them busy."

There's a somewhat similar situation in Rutland, where Joseph Giancola heads Giancola Construction and a real estate company that also carries his name. But in another way, his situation is unique. After redeveloping the 16-acre abandoned Howe-Richardson scale factory next to the downtown business district to become a mixed-use adjunct to the area, he is now taking on another defunct industrial property to the north of the Howe Center.

Once the Patch-Wegner foundry and then the Himolene plastic bag plant, the facility has been carved into smaller space suitable for home-grown manufacturers, offices, and service businesses. Giancola has added other buildings to make the complex more functional. That isn't all his crews are working on - by October they should have finished a large office building in Ludlow, for instance, and there's a local stormwater line in the works - but it helps.

Look for Giancola's book "Howe Two," soon to be released, which he and local historian and author Don Wickman put together to give other developers an idea of what to do and not to do in redeveloping similar properties.

"We just hired a carpenter and two equipment operators," he said, "so we must be doing something right."

Turbulence in the markets hasn't overwhelmed the interest in Vermont shown by financially qualified out-of-staters. That has made the ski resorts one of the more reliable sources of work in the current construction environment.

Parker Riehle, the executive director of the Vermont Ski Areas Association, said "We definitely have a lot of construction projects in the pipeline." Stowe has Spruce Peak at Stowe and phase two of the Still Mountain Lodge project, Sugarbush has its Gatehouse Lodge as part of plans for Lincoln Peak Village, Jay Peak is talking about more lodgings, Killington's new ownership is planning an $8.5 million Sky Peak Express, and there are more, he said.

Ascutney is a particularly interesting example. Riehle said that resort is now affiliated with Orange Lake Resorts in Florida, opening up new possibilities for "snowbird" two-way tourism. The Town of Ascutney just approved a project with the resort that will create the first single-family homes in that area for years, he said.

Along the way, many resorts have been making investments in "green" technology, especially for things like snowmaking, Riehle said. "It's paying huge dividends in the short and the long run," he said.

The McKernon Group in Brandon has made a name for itself combining historic preservation skills, green building skills and design expertise to serve high-end and very-high-end clients. Until recently, the credit crunch hadn't made a difference, because they were dealing with people who could pay cash - though not the ones who benefited from their work for a televised home makeover program.

But company president Jack McKernon said that now, the market is "bottom line: fair. The small projects are not coming in." However, "We've had work for 80 people through the winter, and we may be hiring, so depending on what comes in..."

Some of the slack in that market is being taken up by some of the new energy-related products the McKernon Group is now distributing and installing. "We're very much in the green, and it seems to be selling," he said. Solar, wind, and geothermal equipment are all in demand, he said, citing as an example of the latter one very large residence where the owner insisted on drilling seven wells to make geothermal heating and cooling the source. "It's amazing to see the people who are coming out of the woodwork," McKernon said.

As for commercial projects, Tasha Wallace, at the Vermont Retail Association, said "Many of the larger retail chains are cutting back on opening new stores." Many but not all: a new Lowe's is under construction in Essex; Middlebury is having fierce debates about the wisdom of allowing a new Staples in (they were able to duck the Starbucks debate when that chain slashed the number of its shops and abandoned the idea of opening one in that town); and Rutland City has been working with the developer of a whole new shopping center in Rutland Town on Route Seven South, hoping to work out a deal supportive of central business district as well as outlying shopping.

But to gauge the general situation, Wallace recommended the research done by the National Retail Federation. Vermont data comes in slowly and is not as complete, she said.

"Consumers Focus on Necessities and Hold Back on Discretionary Spending in June, According to NRF" was the title of a July 15 release. "Although millions of tax rebate checks hit mailboxes in June, consumer spending remained soft last month. According to the National Retail Federation, retail industry sales for June (which exclude automobiles, gas stations, and restaurants) rose 1.3 percent unadjusted over last year and increased 0.2 percent seasonally adjusted month-to-month."

The NRF referred to US Commerce Department data, which showed that "total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.1 percent seasonally adjusted from the previous month and increased 1.0 percent unadjusted year-over-year."

The NRF's conclusion seemed to indicate that retail dollars would be going into marketing, not construction. "'Many consumers have been practical with their tax rebate checks, using them to offset higher prices of gas and food,' said NRF Chief Economist Rosalind Wells. 'As retailers enter the back to school season, they will have to be creative in finding ways to get consumers to spend on discretionary items'."

Speaking of schools: Cathy Hilgendorf, who in better years is a key figure in awarding state aid to elementary and high school construction projects, said "No, not really" when asked if there were any sizable school building projects going. "We were already under a suspension from the Legislature for school projects," and with the tax shortfall due to the slowing economy, that doesn't seem as if it will be lifted.

While there was money, switching from oil to wood chips was one of the most commonly funded public school projects. "Schools that switched to wood chip heat are thrilled that they did," Hilgendorf said (and schools whose budgets have been trashed by high heating and transportation costs are once again back-burnering minor maintenance and upkeep work, thus preparing for another round of school construction at some later date).

But higher education has been one of the bright spots. Competing vertically rather than horizontally (attracting top students who become highly paid achievers as adults and gratefully donate so future generations can have the same advantage, between generations as well as during one) they tend to operate according to cycles that can obviate downturns in the profit-oriented economic cycle.

So UVM is renovating a laboratory building and a dining hall, Landmark College in Putney is putting in a kind of student center in their "cafe" plan, Middlebury College has just completed the transformation of a former library into a center for the humanities and is in the process of adding a wood-chip-fired boiler to their heating plant, Castleton State College has had to scale back a $25 million building plan but it will go on minus the student center, the College of St. Joseph in Rutland has acquired adjacent land and is planning for it - and other examples could be cited.

Architectural firms see the present construction landscape from different vantage points. Kirk Moore, who heads Browning Moore Associates in Rutland and Bennington, said "We're getting by. There's definitely been a slowdown in the marketplace. We're seeing a lot of projects that are pending either permits or funding."However, Browning Moore had prepared for that eventuality by moving strongly into the area of what is sometimes called "building forensics," but may be better characterized as informed structural upkeep. Moore said they look at both older and newer buildings to see how well they're working and to identify weak spots. For instance, they can use non-destructive infrared testing to identify places where moisture had penetrated, or thermal imaging to locate costly problems with heat loss. Resort area condominiums have proven to be likely clients. "We've been pretty busy with that part of the work," he said.

At Freeman French Freeman in Burlington, president Jesse Beck said, "Actually, we're having our best year ever." It's helped that they've been involved with two UVM projects that together are worth about $55 million, he said. Those are part of a program that's continued over the past 10 years, he noted.

Another piece of long-term thinking at UVM is their decision to try to obtain one of the toughest certifications for green construction, LEED Silver, Beck said. Those initials, standing for Leadership in Energy and Environmental Design, are becoming better known as the U.S. Green Building Council makes more and more third-party determinations related to the standards. These involved things like how far the materials had to travel as well as what kinds of devices are used and how much insulation there is, Beck observed, so the thinking is truly ecological.

Work at Stowe has helped FFF's bottom line, Beck said. And Burlington International Airport has been calling on them for 10 years now.

About the airport: Beck said that when the parking garage is done, the roof will exemplify the new environmental thinking. Plantings will be there (literally a green roof), solar panels will occupy part of the space, and people at the airport will be able to come up and enjoy a 360-degree view.

Restoration of Burlington's former coal-fired Moran power plant into a multi-use and recreational facility also shows how the green building movement has taken hold, Beck said. It's another LEED project, and "sustainability has been the primary goal."

"We like renovating buildings," he said. A challenging instance has been Middlebury College's Proctor Hall, which housed several dining facilities, the student radio station, the campus bookstore. Originally the College thought about leveling it and starting over, but "the students liked it so much they decided to renovate," he said. "It's a historic classic brick building," and "it's going to be a wonderful facility," he said. Not only that, keeping the old Proctor will match a campus determination to recycle as much as possible that led, for instance, to recycling every bit of a seven-story former science center that had to be removed to make way for a modern library.

Hospital modernization, led in part by technological developments that make demands regardless of funding difficulties, have been a good source of construction business over the past decade. One person observed that a wave of such projects started in the southern part of the state, and has continued northward. For Freeman French Freeman, a recent part of that has been designing a psychiatric facility for the Veterans Administration in White River Junction - a very challenging project, Beck said, because the idea is to combine a high level of security with surroundings that make troubled patients feel comfortable.

"We are having a very good year, so far," Beck said. They're at 22 employees, and would like to stay at 20 or so and not grow too big, so they're a bit ahead, he said.

Looking Like Fall, Thinking About Winter

Donald Wells has one of the more comprehensive views of Vermont's construction industry, not only as the founder and president of one of the larger companies (DEW Construction in Williston) but also as president of the Associated General Contractors. His own firm looks to be on track to matching last year's activity level - projects worth just under $80 million - but there's no doubt that it's a tougher business environment and is likely to continue to be for at least six to 12 months.

Fortunes, in the sense of fate rather than a lot of money, vary among companies, Wells said. For instance, he has talked to a fair number of architects, and "some say they don't have a lot of work, while others say they are pretty busy.""There's an awful lot of subs (subcontractors) that have had some layoffs, and there are some general contractors, too," Wells said. "There are fewer jobs to choose from. We're fortunate, almost all of our work is negotiated" with clients with whom they have longer-term relationships. (D.E.W. is not the only company that has sought to avoid the risks of bidding - which is especially tough given the fluctuations in materials costs, which are discussed in another article. Bread Loaf, Inc., a planning, designing and building company in Middlebury, reported having a variety of jobs in Vermont and New Hampshire, but their approach has been build enduring relationships rather than sharpen estimators' pencils, said vice-president of business development Michael McLaughlin.)

"It's just not business as usual," Wells said. "You have to be a lot more aggressive" in bidding, and not everyone who takes risks follows the principle that "you never gamble more than you can afford to lose." Relationships matter now, including having good relationships with reliable subcontractors and having strong connections with good employees. It's tough for lightly capitalized companies, he said, "but it's the larger contractors that are having some tough times, too."

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