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10 Hartford Business Journal • September 19, 2016 www.HartfordBusiness.com REPORTER'S NOTEBOOK Over BBQ, Malloy waxes on Hartford, regionalism, more One of Hartford's most visible and influen- tial residents, Gov. Dannel P. Malloy, admits to having an "urban soft spot.'' The ex-Stamford mayor who has lived dur- ing his two terms as the state's chief executive officer in the official state residence in Hart- ford, cited the city as one of the leading recipi- ents of state revenue-sharing during his tenure. "We're sending more money to Hartford,'' Malloy told a barbecue-lunch gathering last week of Business for Downtown Hartford at Black Eyed Sally's restaurant. "We've increased that every year that I've been gov- ernor. … It may not be enough, but it's more.'' Asked about Hartford Mayor Luke Bronin's ongoing dialogue with surrounding towns about a regional solution to the city's fiscal woes, Mal- loy acknowledged "regionalism'' remains a tough sell to its suburban and rural neighbors. But Malloy noted that the lack of region- alism was a direct outgrowth of resistance decades ago by Hartford and New Haven to sharing their wealth with their suburban neighbors that ultimately led to dismantling of the state's county-governance structure. State lawmakers voted to abolish Connecti- cut's county government in 1959. "Lesson No. 1: Be careful what you wish for because things do change,'' the governor said. Prodded about the elimination of the state's tourism districts, one of which was charged with promoting Hartford as a tourism destination, Malloy said Hartford remains the centerpiece of the state's tour- ism-promotion efforts. "We're promoting the hell out of this region,'' he said, noting that city landmarks and attractions are included in the state's consolidated tourism promotions. "A dol- lar promoting Connecticut is a better dollar spent than promoting regional'' attractions. Redevelopment of one of Hartford's big- gest draws, the downtown XL Center, can aid mightily, Malloy said, in making the Capital City a destination for in- and out-of-state visitors. The $250 million proposal to remake the four- decade-old arena wouldn't only benefit UConn's ice-hockey and men's and women's basketball teams, which play home games there, he said. XL's upgrade, too, Malloy said in response to a query, would make it palatable for the city and state to pursue one of several NHL hock- ey teams in the Midwest and West that have indicated a desire to eventually relocate. — Gregory Seay on construction firms to shave margin on their bids so they can compete in a price- sensitive environment in which the lowest bidder, particularly for government projects, often rules the day. Thompson said Allstate's more detailed bid wound up at the high end and may not be selected as a result. "It's difficult," he said, "because you're looking at a project anticipating what the scope is, trying to be as detailed and thor- ough as you can, all the time knowing you're competing against others who may not be as detailed or informed. You spend a lot of time putting something together when oth- ers may be just taking a stab at it." Industry slowdown The Great Recession put a major damper on Connecticut's construction industry, and although the sector is in better shape today than it was a few years ago, the recovery has been slow. In 2015, for example, Connecticut's pri- vate construction industry was tied with New York's for offering the least economic impact in the U.S. when measured as a per- centage of gross domestic product (GDP), according to a recent report by the Associ- ated Builders and Contractors (ABC). In its report, ABC found the direct eco- nomic value added by the private construction industry — largely measured by the value of the labor force — accounted for just 3.1 percent of GDP in Connecticut, below the national aver- age of 3.9 percent. (The number in Connecticut reached as low as 2.1 percent of GDP in 2010.) Meantime, Connecticut's construction unemployment rate in July was the sixth highest in the country at 6.3 percent, com- pared to the nation's 4.5 percent jobless rate, according to ABC. The industry employs about 58,000 people in Connecticut, which remains 11,400 jobs short of 2008's peak employment of 69,400, state Department of Labor numbers show. Chris Syrek, president of ABC's Con- necticut chapter, attributes the hardships to a challenging economic environment, continuing state budget deficits and the "high cost of doing business" in Connecti- cut, whether because of competition, taxes, utility costs or bureaucratic delays. Some firms are also having a hard time find- ing qualified workers, due to the sector's aging workforce and the significant number of people who left the industry following the recession. Don Shubert, president of the Connecti- cut Construction Industries Association (CCIA), which has more than 300 members, said a smattering of 30-plus jobs posted online by members at the end of August reflects that shrinking workforce. Attracting commercial work remains a challenge regardless, he said. "The pool of work hasn't come back to the point where contractors are at full capacity, so there's still a lot of pressure and competi- tion in the marketplace," Shubert said. "We're getting a sense that we're stalling out." Professional firms like Allstate and KBE Building Corp. of Farmington agree. Part of the problem is "red tape," said Tim O'Brien, KBE's executive vice president. For example, the Connecticut Commis- sion on Human Rights and Opportunities (CHRO) has had to expand its scope from state to municipal projects when overseeing affirmative-action plans and setting targets for small business minority hiring. While the outcome is desirable, O'Brien and Syrek said, it has added a new regula- tory burden. Contract work often will be completed before a CHRO hiring plan is put forth, but until there is an approved plan, the state holds back 2 percent of the value of the contract. That delays a contractor's ability to reinvest in other jobs or employees, Syrek said. A proposed state Senate bill that would have required CHRO action on such plans within 90 days never materialized, but ABC plans to resurrect the proposal next session, he said. O'Brien called the approval process cumbersome. "Documentation and compliance adds an administrative cost to every business that must follow the [CHRO] programs put in place in the state," he said. "Builders who want to build, spend more time trying to comply than they do building buildings." Impact of changing workplace In late August, a quarterly overview known as the Marcum Commercial Construc- tion Index reported a softening nationwide in nonresidential construction spending. June's spending shrank 0.6 percent to $682 billion on a seasonally adjusted, annualized basis — the first period of negative year-over-year growth since July of 2013, the report said. The changing commercial workplace where more people telecommute also has contributed to the commercial construction industry challenges, said Peter Gioia, vice president and economist at the Connecticut Business & Industry Association. "Connecticut hasn't been attracting enough new businesses into the state and the [state] population is pretty stagnant," Gioia said. "What needs to improve is, on the municipal level, towns have got to decide whether they want economic development and the state has got to say, 'How can we speed this up?' " The not-in-my-backyard (NIMBY) attitude is deterring development, yet NIMBY parents are complaining their children are moving out of state for lack of jobs, Gioia said. But with- out economic development, there are fewer jobs to keep young adults here, he added. Shubert, of the CCIA, argues that an aggressive transportation improvement effort by the state Department of Transpor- tation would lead to transit-oriented devel- opment and more construction work. There already has been increased development activity proposed or underway along the 9.4-mile CTfastrak busway route, including office and residential projects. As for O'Brien, he is relieved that ABC will be pursuing legislation to circumvent delays in CHRO's affirmative-action process. Meantime, both his firm and ABC are trying to attract students from technical high schools to the workforce. The industry needs more trade craftsmen and field superintendents — managers on constructions sites, he said, so KBE will bring some students directly into the firm in a new program launching this fall. "We're showing kids there's another path," he said. "The trades can be a great career." n from page 1 Construction recovery slower Top/Bottom States for Construction Industry Economic Impact These numbers represent estimates of the value added by construction to national and state GDP in 2015. The value-added measure excludes the value (cost) of materials used in a construction project, but does include the value of labor employed in construction. Top 5 States States % of GDP North Dakota 7.6 Hawaii 5.9 Montana 5.8 Wyoming 5.7 Louisiana 5.5 Bottom 5 States States % of GDP Ohio 3.4 Oregon 3.3 Delaware 3.2 Connecticut 3.1 New York 3.1 S O U R C E : A S S O C I A T E D B U I L D E R S A N D C O N T R A C T O R S Don Shubert, president of the CT Construction Industries Association, said the state's construction sector is stalling. P H O T O | H B J F I L E Gov. Dannel P. Malloy spoke to Hartford business leaders. P H O T O | H B J F I L E