Call it a bright spot amid the economic gloom.
L.A.'s engineering and construction companies are eagerly eyeing the prospect of tens of billions of dollars in contracts after voters last week approved more than $50 billion worth of funding for local transportation and school construction projects and a $10 billion high-speed rail bond.
By comparison, the Los Angeles Unified School District's ongoing school building construction program, which has been called the most expensive municipal project in the country's history, is worth only $20 billion.
"This is a big deal, especially in today's environment," said Jack Scott, president and chief operating officer of Parsons Corp., a Pasadena-based engineering and construction management company that has a history of contracting for the Los Angeles Unified School District and the Metropolitan Transportation Authority.
"This is a significant opportunity for firms like ours and it will bring in bidders from all over the country."
One catch: The money may not flow fast enough to be of much help during the immediate economic downturn, especially for transportation projects. That's because many of the projects also need matching funds from the federal government before they can move forward; those federal funds could take years to materialize.
"While this is very encouraging, we certainly can't have hopes that are too high. The faucet won't turn on tomorrow for these projects," said Blake Murillo, chief executive of Los Angeles-based Psomas and Associates, an engineering firm.
Instead, what's likely to happen is a stream of school and transportation projects coming forward over the next decade, still a pleasant prospect given the bust that's now taking place on the commercial side of the business.
"It will pick up some of the slack in the construction industry," said Christopher Thornberg, principal at Beacon Economics, a consulting firm with offices in Los Angeles and the Bay Area. "But this won't be an instant cure."
Another catch: The huge amounts of money will draw bids from out-of-state contractors, amping up the competition for the jobs, Scott said.
The bonds are an unexpected gift for the engineering and construction industry: Insiders expected most of the measures to be defeated due to voter concerns about the economy and budget problems.
"We thought one or two of these would pass, but not all of them, especially given where the editorials were coming down in the local papers. We're obviously very pleased," Scott said.
Locally, the biggest funding measure is Measure R, the half-cent sales tax increase for Los Angeles County that would raise up to $40 billion over the next 30 years for such projects as the "subway to the sea" along Wilshire Boulevard, connecting the Green Line to Los Angeles International Airport, constructing express bus lanes on major surface streets and making scores of other street and highway improvements to ease the region's infamous traffic congestion.
Measure R needed two-thirds voter approval to pass; as of mid-day Nov. 6, it was just above that threshold at 67.4 percent support with more than 600,000 ballots yet to be counted.
The margins of victory were more substantial for the two major school construction bonds on the local ballot: Measure J, a $3 billion facilities bond for the Los Angeles Community Colleges District and Measure Q, a $7 billion bond for repairs and upgrades to existing schools within the Los Angeles Unified School District. Both needed only 55 percent approval but ended up with nearly 70 percent support.
Bond measures for smaller school districts also passed on Nov. 4, providing hundreds of millions of dollars more in construction projects over the next several years.
At the state level, the biggest surprise for the engineering and construction industry was passage of Proposition 1A, the $9.9 billion bond measure for construction of a high-speed rail line from Los Angeles to San Francisco that would allow trains to travel between the cities in two-and-a-half hours.
Local contractors say the money is likely to flow first for the school bonds, since they don't require any matching funds and many of the projects are ready to go.
"The school bonds are ready relief for our industry, which is going through a very tough time right now," said Foster Dennis, president of Los Angeles-based California Paving & Grading Inc., which has done work for the Los Angeles Community College District.
Dennis said that lending problems have put many commercial projects on hold, while the oil price spike this summer caused asphalt prices to soar. "The refiners still haven't given us relief on the asphalt prices," he said.
Any long delays in bringing these projects forward could prove costly. Thornberg said that if the bonds for all these projects aren't brought to the street soon within the next year or so a golden opportunity could be lost. "Right now, if you have a reliable repayment source, it's a very good interest rate environment to pass these bonds. In another couple years, interest rates could be significantly higher, making these projects much more expensive."
In other post-election news:
- Business interests defeated a proposed annual 75,000-square-foot cap on commercial development in Santa Monica.
- A proposal passed in Redondo Beach to require significant development projects to be put to a citywide vote.
- The business-backed candidate for the second district county supervisor seat, L.A. City Councilman Bernard Parks, lost to labor-backed candidate, state Sen. Mark Ridley-Thomas.
- Business interests cheered the apparent narrow passage of the Proposition 11 redistricting initiative, which would take the power to redraw legislative district boundaries out of the Legislature and give it to a separate commission.
Voters approved billions of dollars worth of construction bonds for projects in Los Angeles County and throughout the state. A potential $60 billion in contracts could lead to a boom for the local engineering and construction industry.
Many of the projects are contingent on matching federal funds, which could take years to materialize.
THE NEXT STEP:
State and local officials will have to lobby Congress and Obama administration officials for the money.
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