Star Tribune

Business

Shutdown hit road builders

Construction projects were delayed, employees lost weeks of pay or worse, and financial problems may linger for years.

Article by: DEE DePASS , Star Tribune

Updated: August 3, 2011 - 10:45 AM

The Minnesota state shutdown was temporary. Its damage was not.

Highway builder KGM Contractors lost $1 million in revenue and equipment relocation expenses -- a staggering sum that will force it to lay off managers and postpone machine maintenance.

Some of the Angora, Minn.-based construction company's 150 employees will also lose their union health insurance. Under union rules, they must work a set number of days to qualify for coverage. With the wet spring, state shutdown and the standard winter slowdown, some will be forced to pay the full $900 to $1,500 monthly premium on their own.

The shutdown created "a massive mess," said Karla Abramson, KGM president and co-owner. It cost KGM $40,000 to strip down and move the temporary "hot mix'' plant and silos Abramson was using to pave Hwy. 65, up north. It cost another $15,000 to haul the massive equipment off state Hwy. 23 in Paynesville, just outside of St. Cloud.

Many of the state's construction contractors are crawling out from the shutdown only to find lingering financial woes from which it will take years to recover.

Tim Worke heads the heavy equipment and highway division for the 450-member Associated General Contractors in St. Paul.

"Some members [have] 70 to 80 percent of their yearly business with the Minnesota Department of Transportation (MnDOT). So they have been impacted significantly."

Many filed claims with MnDOT hoping to recoup shutdown related costs that came before, during and after the actual shutdown, Worke said.

Some construction firms suffering "pre-shutdown costs" were ordered by the state to stop road projects. But they were also ordered to launch public safety measures -- setting up traffic barriers and signs, erosion controls and removing equipment off site.

Other contractors suffered "duration" costs because "we lost the 20 most productive days of the entire Minnesota construction season," Worke said. Some of those projects will be delayed until next year.

Still other contractors bear "post-shutdown costs" because they moved on, rescheduled employees and equipment and materials to other non-state job sites, only to be called back to the original state project.

MnDOT spokeswoman Christina Joyce said MnDOT is evaluating each contractor's financial claim on a case-by-case basis. It's been difficult for everyone she said, noting that more than 4,500 MnDOT workers were also shut out of their jobs during the shutdown.

"It's been pretty devastating to everybody. The effects are felt by lots of employees throughout the state, not just state workers. It has rippled effects through the community and the state," Joyce said.

No need to tell that to Dan Radle. The foreman on the Hwy. 23 construction job in Paynesville said eight of his pavers and diggers rented a house near the job site for the summer. Now they owe $1,300 for July but never got a paycheck.

Some construction workers worry about bigger losses.

"We had to lay off 60 to 70 percent of our employees during the shutdown," Abramson said. "They ended up going on unemployment, and now they will be short hours for their health insurance because the [construction] season is so short."

Radle, his wife, Becky, and daughter, Kelsey, all worked on Hwy. 23 and all three were laid off during the shutdown. Radle was called back when flooding from heavy rains required emergency road repairs.

But Becky Radle, who drives a massive dirt roller for the company, wasn't so lucky. And she'd already been laid off in November and had just started working again in June.

When the state shut down, she burned up three more weeks of unemployment. "When she gets laid off again, probably at the end of September, she will have to sit two or three weeks before she can get unemployment again," Radle said. "It messes her up."

His daughter, Kelsey is not much better. Come September, she won't have enough money to return to college and will sit out the fall semester.

How long will the dislocations from the shutdown last? "It will be a full year for sure if not longer, I guarantee you that," Radle said.

The state shutdown pulled the plug on four of the five road construction projects Connie Pearson had in the works. She laid off four of her six employees at Precision Testing Inc., the concrete and asphalt testing company she owns in Virginia, Minn.

"It will be really hard to recover from this," Pearson said adding that "this has cost me 90 percent of my revenues. This hurts and there is nothing we can do about it, either."

At one time, ACE Hydro Seeding President Crystal Van Muyden, felt equally helpless.

"We are owed $88,000. If we don't receive the money soon that we are owned for the MnDOT projects, we will be out of business. We can probably hold off until the end of August," Van Muyden said.

"If they take longer than the end of August to pay, then I am reluctant to guess" how long ACE can last, she said.

Ten days ago, good news landed. Van Muyden won one of the 14 city and county projects she bid on during the shutdown.

"It's less than $3,500," she said. "It's not anywhere near large enough to replace our state work. But it's a job."

Dee DePass • 612-673-7725

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