Hope for contractors

Winston German is thankful for the federal government.

German, general manager of Ellendale Electric Inc., says federal projects have contributed to his company maintaining employment levels in a tough construction environment. Ellendale worked on the first phase of Legends Park — funded by a federal HOPE VI grant — as a subcontractor.

The Bartlett-based electrical contractor didn’t have to hire more employees for Legends Park, but it helped keep current employment. A few years ago, Ellendale Electric had anywhere from 120 to 150 employees. Now it’s down to 75.

“These types of projects help us maintain what we have,” German says. “If it wasn’t for Legends and other government work, we probably would have had to cut even more.”

Memphis was chosen in June for a $22 million HOPE VI grant to tear down and redevelop housing project Cleaborn Homes. As Memphis picks up yet another HOPE VI grant, the city’s construction industry will get an influx of work during a challenging time.

Operated by the U.S. Department of Housing and Urban Development, HOPE VI grants transform public housing into mixed-income communities. So far, the city has gotten five HOPE VI grants worth more than $150 million, including Dixie Homes at Poplar and Pauline, which is currently being redeveloped into the 278-unit Legends Park.

Administered locally by the Memphis Housing Authority, past HOPE VI projects include Hurt Village, now known as Uptown, the redeveloped LeMoyne Gardens, and Lamar Terrace at Lamar and Interstate 240, now the 473-unit University Place. The Memphis Housing Authority also is working to get yet another HOPE VI grant to tear down the Foote Homes complex near Vance and Danny Thomas Boulevard.

With the newest grant, Cleaborn’s 460 units will be torn down by the end of the year and replaced with 400 new units.

Caroma Construction Co. currently is building Legends Park. The company’s employee count is down 25% compared to last year as a result of the economy, according to president Dan Jones. It currently employs 25 people.

Caroma rehired some of these workers for projects like Legends Park, but not enough to bring it back to last year’s employment level.

While the HOPE VI funds are important to the local economy, they aren’t going to save the construction industry.

“Particularly in this economy, I would call it more than a drop in the bucket,” Mike Carpenter, executive director of Associated Builders and Contractors Inc.’s West Tennessee chapter, says of the new HOPE VI dollars. “But compared to where we were a few years ago, it helps, but it’s not a panacea. We have a number of commercial contractors whose gross revenues in an average year is far above what’s being applied to this project.”

The projects still generate jobs, though. University Place created 936 construction jobs, Legends Park East created 408 and Uptown created 442, according to the Memphis Housing Authority.

“In the past couple of years there has been enough multifamily HUD work to keep things going,” Jones says. “Anything helps these days. If you have a funded project, it’s a good thing.”

Even with this project, Caroma’s annual volume is going to drop 50% compared to last year.

“This will bring some people back, but not everyone we’ve had to lay off over the past six months or so,” Jones says.

Government projects such as Hope VI developments also have to pay a prevailing wage, which evens out subcontractor bids for work.

Prevailing wages are national wage rates which everyone uses for project bids. These wages are set for various regions across the country for specialties such as electricians, plumbers and carpenters working on government projects. They are normally higher than non-government projects, according to German.

“They do it to keep people from using unskilled labor and to help ensure they get better quality,” he says.

On some projects, there are dozens of subcontractors bidding for work and oftentimes, the lowest bid wins.

“I don’t think anyone’s going to yield much profit out of those types of jobs,” German says. “When you get it, you’re running on a very thin line.”

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