Construction industry expects big boost from Annapolis spending measures

Gas tax increase, schools plan could help depressed sector

  • Debris is cleared from a lot on Russell and Barclay streets, the site of Baltimore's Horseshoe Casino.
Debris is cleared from a lot on Russell and Barclay streets,… (Baltimore Sun photo by Algerina…)
April 01, 2013|By Michael Dresser, The Baltimore Sun

For Maryland's building industry, the good times may be coming back.

The construction sector, which has been in the tank for the better part of five years, is on the verge of receiving a sizable infusion of money from recent decisions in Annapolis.

Much to the chagrin of many Maryland motorists, the General Assembly has approved legislation to charge hundreds of millions of dollars a year in additional gas taxes — money that will build new roads and transit systems.

Also heading to Gov. Martin O'Malley's desk is a $1 billion plan to build 15 new schools in Baltimore and renovate three dozen more. And O'Malley's $1.1 billion non-transportation capital budget bill — explicitly billed as a job-creation package — is expected to be passed within days.

All this comes at a time when two mammoth, privately built casinos — one in Baltimore and the other in Prince George's County — are in the pipeline as a result of previous action by state lawmakers.

For people like David C. Bramble, the help can't come quickly enough. President of the Chestertown-based David A. Bramble Co., Bramble said his company employed about 450 people five years ago but has needed fewer than 100 lately because of a drought of road construction projects.

"I'm actually happy about the gas tax going up," Bramble said. "People in my industry have been devastated."

Maryland construction executives and union workers are celebrating the new jobs coming from Annapolis, especially the billions of dollars in public works spending set in motion this session. But critics of government spending — and of the higher gas tax in particular — say it will do more harm than good.

Sen. Edward R. Reilly of Anne Arundel County was one of several Republicans who warned before last week's vote that the gas tax increase was a "job killer."

"The construction industry is the beneficiary. Everybody else has the liability on their balance sheets," he said.

O'Malley, not surprisingly, doesn't see it that way.

"The job killer was the recession that fell on all of us," he said. "None of us ever wants to ask the public to pay more for anything, but if we're going to create jobs ... we've got to be willing to make actual public investments, especially in our infrastructure."

The administration projects that the transportation revenue bill will yield an added 57,000 jobs over a six year period and that its overall capital budget will, including transportation, produce another 43,000. Supporters of the Baltimore school construction plan, which is not an O'Malley administration initiative though the governor supports it, estimate that it will yield 8,000 jobs.

Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute, said the rule of thumb is that each $1 million in construction spending yields eight to 15 jobs. He said the state's construction industry has been down about 30 percent from its former levels.

Clinch said he's aware of the contention that the gas tax increase will cost some jobs as motorists take their business over the state border. But he said the gains in construction would outweigh that.

"This is all unambiguously good for the economy," he said.

Pierce Flanigan IV, president of the Baltimore-based road construction and asphalt company P. Flanigan & Sons, said the latest developments in Annapolis are "a huge plus."

Whatever ill effects the gas tax increase might have on consumers, the boost in revenue will finance the type of projects that are his firm's bread and butter. His company doesn't put up buildings, but he figures the school construction plan will include plenty of parking lots and sidewalks — work he'd be happy to bid on.

Even opponents of the gas tax increase concede that it will provide a boost to construction. But they warn that when all the other effects are accounted for, it won't be good for the state.

"That sector is going to get up off its knees and get moving, but at a much higher expense to the rest of the state," said Christopher Summers, president of the conservative Maryland Public Policy Institute,

Jermaine Jones, business manager for the Baltimore-based Local 710 of the Laborers International Union, said the schools, transportation, casino and other work will be good for his members.

"Right now we have more members out of work than we've ever had," he said. "This is not extra spending. These are jobs that people certainly need."

Anirban Basu, president of the Sage Policy Group, identified a downside to the revenue measure in a report he prepared for the conservative Americans for Prosperity Foundation. In that study, whose findings Reilly cited during floor debate, Basu found a 3 percent sales tax on gasoline — the amount Marylanders will start paying in 2015 — could cost the state almost 1,000 jobs and the loss of $124 million in economic activity.

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