Economic Uncertainty Might Provide Opportunity to Recruit

By Rindi White

he construction industry leaves a huge footprint on Alaska’s overall economy.

When all job categories are included—direct, indirect, and induced—the Alaska construction industry affects 42,000 jobs and about $3.4 billion in wages.

Alaska’s construction economy accounts for nine percent of the jobs in the state and 10 percent of the economy, says McKinley Research Group, the research and consulting office that compiled the January 2021 Economic Benefits of Alaska’s Construction Industry and 2021 Construction Spending Forecast for Associated General Contractors of Alaska and the Construction Industry Progress Fund. The spending forecast was presented at a webinar January 28.

While the economic benefits to the state are significant, the current forecast for the industry is a little foggy. Overall wages are expected to go down by about six percent this year, and will be a little more dependent on public construction funding than in previous years. Public-sector spending is usually a third of overall construction spending, says McKinley Research economist Katie Berry. This year it’s expected to make up about half.

“Oil prices and COVID are all factors impacting private companies’ ability to invest,” Berry says.

AGC of Alaska Executive Director Alicia Siira says AGC of America is addressing a rise across the US in delayed or cancelled projects, lower business volumes, and expected staffing cuts in construction firms with an effort to underscore or improve training programs and create new recruitment outreach plans called “Construction is Essential.” The effort, launched in January, uses targeted digital advertising to reinforce local and regional construction workforce campaigns.

“The outlook for the industry could improve, however, if federal officials are able to boost investments in infrastructure, backfill state and local construction budgets and avoid the temptation to impose costly new regulatory barriers,” says AGC of America’s Chief Executive Officer Stephen Sandherr. “But even as we work to advocate for measures to rebuild demand for construction, we also need to take longer-term steps to continue developing the construction workforce.”

At the webinar, Siira fielded several questions from those attending via Zoom. One attendee asked if oil and gas spending projections considered any recent executive orders made by incoming President Joe Biden and his team. Berry says staff working on the January spending report analyzed all data available through the final quarter of 2020, but were unable to analyze the impact of executive orders or other legislation issued after President Biden was inaugurated.

“It’s a little unclear,” Berry says.

2021 Private Sector

Construction Outlook

Oil prices, exploration prospects, and oilfield development drive most of the petroleum-related construction spending. COVID-19, November’s Ballot Measure One, and drop in oil prices affected construction planning by deferring some 2020 spending. A projected gradual oil price recovery should support restart of projects in 2021, including work in ConocoPhillips’ Alpine and Kuparuk River fields and the GMT-2 project. Hilcorp expects to invest in improvements at its newly acquired Prudhoe Bay assets and Milne Point, and in Cook Inlet. Longer-term prospects include Oil Search’s Pikka project and ConocoPhillip’s Willow project.

Alaska’s six large mines all plan expenditures in 2021 for projects such as mill expansions, roads, tunnels, and water management. While no new mine development-related construction spending is expected in 2021, Donlin Gold and Ambler Access Road have near-term development potential.

Alaska’s visitor industry took a big hit in 2020, and recovery may be slow. However, some construction is expected in 2021, including the Aloft Hotel in Anchorage and Hilton Home 2 in Wasilla, completion of Icy Strait Point gondola projects, and expansion of Halibut Point Marine Services Sitka docking facilities. Developers hope to break ground on the Seward dock/terminal facilities and port-uplands preparation for future projects. Norwegian Cruise Lines’ planning for its new property on Juneau’s downtown waterfront suggests near-term construction activity.

Construction spending in 2021 will be buoyed by several utility projects. GCI, along with Alaska Communications, continues investment in 5G wireless expansion and cable-modem plant capacity. Electric utilities, such as Homer Electric Association, Matanuska Electric Association, and Chugach Electric Association, are expected to upgrade systems and facilities, as well as bulk fuel and rural power installations. Alaska Industrial Development and Export Authority expects construction-related spending for work at the Snettisham Transmission facility.

Though difficult to measure in detail, businesses in all sectors throughout Alaska will continue to invest in new facilities, upgrades, and expansions, like the Key Bank Building in Anchorage, Juneau’s new Sealaska Heritage Institute Arts Campus, and retail developments and improvements such as Costco, Carrs-Safeway, Verizon, Sonic, Alaska Industrial Hardware, and The Shoppes at Sun Mountain, in Anchorage, the Matanuska-Susitna Borough, Fairbanks, and elsewhere. About $500 million in storage and air-logistics projects at Anchorage International Airport are expected to get underway in 2021, though most of that spending will occur in subsequent years.

While the statewide population is down slightly, growth continues in Fairbanks North Star Borough and Mat-Su Borough. An uptick in Fairbanks housing construction is due to the Eielson Air Force Base F-35 installment, and though growth has slowed, Mat-Su continues to attract new households. Through 2020, residential repairs related to the 2018 Southcentral earthquake continued.

U.S. Army Corps of Engineers’ spending is transitioning from large construction programs such as the Long Range Discrimination Radar, Missile Field 4, and F-35 Beddown, to new emphasis on renovating existing infrastructure for Alaska’s Army and Air Force installations. FY21 construction includes a communications center, a combat arms and training facility, and arms and military equipment storage, all at Fort Greely, along with the final phases of Eielson’s F-35 development.

State and local governments share in funding new school construction, rehabilitation, and maintenance. Spending of previously authorized state funds is expected in 2021, including work on the Eek and Bristol Bay schools, school replacement in Atmautluak and Aniak, and many other school renovation and maintenance projects. Spending on Southcentral earthquake repairs and replacements includes Houston’s school and several Anchorage schools, most notably repairs at Gruening Middle School and Eagle River Elementary School.

Airport improvements are anticipated throughout Alaska in 2021, including those on runways and taxiways (Ted Stevens Anchorage International Airport), terminals (Juneau, Anchorage, and Fairbanks), and other upgrading. Dock and harbor construction projects include Haines and Nome launch ramps replacement, harbor reconstruction and waterfront improvements in Juneau, and continued upgrade of the Petroleum Cement Terminal at the Port of Alaska in Anchorage. Alaska Railroad will rehabilitate and replace some bridges and track.

The federal government supports a range of projects other than those related to national defense and transportation. This consistent flow of funding to government entities (including tribal governments) and non-profit organizations supports a variety of services. This includes over $35 million in funding to Alaska’s regional housing authorities to build housing units and rehabilitate existing homes.

Finally, another $280 million in other state and local government expenditures is anticipated in 2021 for projects such as solid waste transfer stations; bulk fuel storage upgrades; water and wastewater treatment facility upgrades; community development initiatives; public employee professional housing; and renovations and repair to state buildings.