Life After Katrina

Steven Ferry

November 2005

In the wake of Hurricane Katrina, and with Hurricane Rita one day away from landfall in Texas at the time of this writing, all AWCI member contractors and suppliers in Mississippi, Alabama and Louisiana were contacted. One third had no telephone service. The remainder echoed what the media and the industry pundits have been reporting and predicting. Widespread devastation on a scale not witnessed in living memory in the United States; and increasing costs and shortages of materials and products and the gas that underpins all production, as well as a possible scarcity of skilled labor—issues they were facing before Katrina with spiking steel, wallboard and concrete prices, as well as skilled-labor stresses.

As with all bad news, there is a silver lining to bring cheer to the construction industry at least: in the case of hurricanes, a construction boom for the area with about quarter of a million homes needing to be rebuilt (compared with 20,000 after Hurricane Ivan and a sizable increase on the two million new houses built last year nationally), and a further half million needing repair.

Katrina did not just impact gas production and delivery and transport of materials by barge/ship as well as on the roads, it also wiped out some production facilities as well as huge swathes of wood production in the South. Given problematic supply and increased demand, therefore, increases in residential construction costs in the devastated regions over the next two years are predicted to be 10 to 15 percent, 5 to 10 percent across the rest of the nation. Commercial cost increases are thought to be in the 5 to 10 percent range locally, and just a few percent nationally. Wood, gypsum board and concrete costs are expected to rise another 10 to 20 percent. In other words, there will be rises, but not as great or unpredictable as the rises experienced a couple of years ago.

On a personal note, Katrina has left some contractors homeless, with all their equipment destroyed (or some appropriated by the military), work projects canceled and work force dispersed. But like the new growth that appears shortly after a devastating forest fire, contractors are already re-appearing out of the ashes and destruction, living in trailers on work sites, new equipment on the go.

A determination to rebuild added to support from others (such as the contractor who set up shop in the offices of one of his clients) has proven once again that it takes a lot to keep a good man down.

Outside Ground Zero
Here is the view of Katrina from the ground, first of all, from those on the outskirts of the devastation:

A supplier in Alabama reports that he is "seeing rising costs in product because of the fuel prices hitting the trucking industry. Trucking companies are implementing fuel surcharges as high as 18 percent of the total bill. Some have implemented an immediate 2 percent increase on materials with other price increases to follow. On metal studs, for instance, we’ll have a 10 percent increase on Oct. 1. The Celotex Gypsum division is now implementing a flat fee of $150 in addition to the $75 flat stopover fee they had before: You pay $150 whether the delivery is a full truck, half truck or a fourth of a truck. I have a bill of lading here, and it says full truck is $150, multiple delivery, any stop is $150.

"On material, we are hearing rumors that as soon as the construction kicks in to the capacity planned down there, not only will material pricing escalate quickly, but supply will become short, too. We saw that with some of the previous hurricane events down around the Florida area, and we felt it. But this is going to be a lot bigger and longer.

"I received a letter from US Gypsum that they had a plant or two completely shut down. I’ve also heard that the concrete industry will be impacted hard, because much of the processing and shipment of concrete goods and products, such as USG’s cement board, a lot of the importing, came through the New Orleans area. There are rumors I have tried to confirm with Georgia Pacific that speed set joint compounds will experience shortages from one manufacturer, but as GP plants are located in the center of the United States, I don’t see any problems. These are just rumors, which is how things are here right now.

"I’m anticipating heavy construction growth in January and onward, as soon as all the infrastructure has been rebuilt and they have determined which facilities are to be demolished, after which planning and architectural design and redeveloping can occur and then rebuilding can begin. There’s going to be some quick action because that’s the one thing that FEMA, the state of Louisiana, the city of New Orleans and any of the outlying areas all the way through Mississippi will be pushing really hard: quick-turn construction completed to bring jobs and employment back to those regions. This is probably one of the toughest things this country has faced in a while, with the broad range of the damage that has occurred on the coast.

"From the contractor’s standpoint, I’m already seeing human resources as an issue. General contractors are already moving satellite crews and personnel into the regions down there and because of that, there is already a shortfall in the Southeast area, around here, in Montgomery: people are pulling up and heading to the devastation because the money is good there. As construction kicks in more, with a quick turn of the dollar from lucrative projects, it’ll draw away quite a few people. Economically it will be good for that region down there, but projects will suffer in other areas with folks trying to maintain their resources with scarcer and therefore more costly labor.

"Quality construction folks from the devastated regions, who are being housed temporarily in outlying areas, can work in them. But they also will recognize how big the boom will be down there and will move right back down there. So, we’re looking at material and labor costs increasing.

"One other thing that suffers anytime large-scale construction is occurring in a large region, is quality control. People will do whatever it takes to complete a project and yet it’s hard to find quality, trained personnel to man a project. When a contractor can only come up with eight drywall hangers for a project requiring 25, he will have a GC demanding he put more men on the job or else. Well, the contractor will go out and find anybody who can put on a hard hat! It applies to the general contractor trade, too. We see it on a day-to-day basis without all of the demands Katrina will make on construction industry resources.”

A Mississippi contractor who missed the wrath of the storm adds that "We were already in pretty good shape with our workload and now we’re picking and choosing jobs. Our volume has increased somewhat. We are short of qualified labor. I can find a lot of people right now because of our history with labor brokers in Arkansas. And being in the drywall and plaster business, there are many more of such people available than, for example, glazers or masons. So, we’re having some trouble, but not major.

"I really thought there would be more people coming from the devastated areas looking for jobs, but I know many still have so much to do to secure their homes and so forth. They probably haven’t even had time to think about work and needing a paycheck. But we have had some come here and we try to utilize all that we can. There are some supply shortages, but we have a pretty broad supply base and I’m not having any problems getting materials. The time frame is a little longer than normal, but we just plan for that. We had heard about price increases prior to Katrina, and expect even more now.

"It is important for contractors to maintain their good name and reputation by trying to help all they can and definitely not price gouging. Hourly rates or whatever they have used in documentation in the past should be stuck to. It might be a little higher now than it was then because of needing places to stay and having to drive farther to work, but in general, I don’t think there would be any price gouging if everybody stayed on a pricing structure that they have record of. Just from the amount of hours they can work with overtime, people can make real good money. When they go out of town, they make a little more anyway. So, there is a lot of opportunity to make good money right now without getting into gouging.”

A Louisiana contractor 160 miles west of Katrina’s landfall was spared any ill effects. "So far, we have hired two plasterers from New Orleans who are staying with relatives nearby. They said they’d never ever return. But money will do strange things to people and when high prices are being paid to rebuild New Orleans, they’ll probably return. One general contractor just today sent out e-mails saying he was back in business and looking for subs to help him rebuild in New Orleans. We might go back next year, but this year, we have too much work to do.

"Last time we had a strong Category 1, it wiped us out. We had no power for 10 days and it was a horrible experience. So I am concerned about Rita making landfall tomorrow and this time our being closer to its center and on the east side. If it swings much more east, we’ll head out. Right now, all we are doing is tying down scaffolding and securing our equipment in the warehouse. Luckily, we just finished a big job and hadn’t started the next one, so we didn’t have too much equipment out.

Three Alabaman contractors said the only real impact from Katrina was the price of gas, which was up at $3 a gallon. One of them adds, "In case Rita wipes out the Texan supply line, we’ve bought some containers and purchased gas in mass quantities, storing it at one of our warehouses. We bought 220 gallons yesterday. We had a problem after Ivan, which hit here, but the only problem with Katrina was difficulty finding gas for about a week, so by filling our trucks daily and storing reserves we should be able to continue work for a week if Rita stops deliveries. What we need is people! We are assisting with the rebuilding efforts in Florida and Alabama since Ivan, which was a year ago last Friday. We’ve experienced an increase in business of about 30 percent due to the hurricane.”

Another also helping with Ivan rebuilding says that "Contractors have come to us from the devastated areas looking for jobs, and we helped them where we could. But basically right now it’s just cleanup, maybe six months before construction begins. Then all the material costs will rise and that will impact us. We have a couple of thousand refugees in our area and we will probably hire some. We have so much work here in east central Alabama that we probably won’t go to the devastated areas, but I’ve quite a few friends helping there right now. They need many more trucks to haul off debris.

"Anything that was in the path of the storm surge was devastated, no matter what it was made of. The surge lifted those huge, 5-story casino buildings built on barges and shoved them up to 300 yards inland, taking everything out in their paths. One of them ended up on top of a hotel. That gives you an idea of the power of that water. We were still down there rebuilding from Ivan, in southern Alabama and the panhandle of Florida. I guess we’re 60 percent back now to how things were before Ivan, so we’re looking at years of reconstruction from Katrina. The devastation from Ivan went as far inland as 100 miles. Katrina created devastation even further inland, but right along the coast is where the most damage occurred.”

A Louisiana supplier reports, "We had some trouble for about a week and a half, and UPS and FedEx at times have been a little bit slower, but otherwise Katrina hasn’t affected us too much. We have shipped a pretty good amount of material to New Orleans for the cleanup and for whenever they start building.”

Another Lousianan supplier confirms that "Katrina has resulted in wallboard shortages. One of my main plants was 12 miles from New Orleans, and one of my main metal stud plants is in Baytown, Texas, right there close to Houston and Rita’s expected landing zone. But the main problem for me right now is mainly wallboard. Another manager here deals with ceiling tiles, and one of his main plants was in Mobile, Ala. My manufacturer is trying to ship from other plants, but it’s just not giving me enough materials at a time when I really need them just for regular business, let alone construction after Katrina. I’ve tried different vendors, found one in Oklahoma, but he’s on allocation because demand is so high, so that’s not too productive, either.

"Before the hurricane, they had announced a 10 percent increase on wallboard, with metal studs prices rising 15 percent on Oct. 1 and again in the first and second quarters of 2006. If anybody around different parts of the country has any extra material that they don’t need, it would be good to pass that information on to people down here in the South, and maybe we can take it off their hands. What’s happening now is many people are calling us from areas north of us offering to come down. But that’s not really helping much when we don’t have the materials we need.”

Feeling the Wrath
A supplier who sustained some damage in Mississippi downplays the fact that he still has two feet of water in his building from Katrina and predicts he’ll be hit by Rita’s edge. "We’re having some trouble finding [wallboard]; plants in Tennessee, Arkansas, Florida—all over the place—are telling us they’re having trouble getting trucks to put onto the loads. We’re swamped with demand for [board], but the rest of our inventory is fine in relation to the demand. Otherwise, several people have come in here asking about roofing jobs, [drywall] jobs, general construction jobs. We give names and numbers for them to call.”

A Louisiana supplier who also sustained some damage states, "Logistics have been impacted—phones out, difficulty finding materials, etc.—and minor roof damage. We had power outages here for over a week and then traffic making commutes difficult, so it’s been difficult … and paying bills will be sketchy for a while. Most of our supplies came from New Orleans, so we’re trying to resource to other suppliers. We switched to Baton Rouge, but the traffic is almost impossible. It’s been real hard to find metal studs, etc.

"We don’t have any Plan C for this. Everybody is doing what he or she can already. I see many guys helping. I haven’t seen anybody price-gouging or trying to take advantage; most are just trying to get back into business with a little payroll for their guys. That’s the bad thing about sitting out: Most of these guys that we hire live paycheck to paycheck. If they miss a few weeks of work, they’re really hurting.

"With Rita coming in, we’re boarding up again and raising equipment off the ground as we’ll probably have small floods from rainfall. I have a few drums of fuel for generators, but we pretty much quit doing a lot of work, just batten everything down and try to take care of our houses and families.

The View from Ground Zero
A contractor from Orlando was called back to a former hospital project in Biloxi, Miss., to assist with repairs. He reports that "We have 10 guys staying there in trailers and RVs. Mobile homes have been put together to sleep in and food cooked for them on grills with a couple of ladies looking after their clothes and so on. We have been up there for several weeks now and it’s going to take several years to rebuild everything. For the first week and a half there were very few supplies, either for water or living or even building. When building picks up, we expect to hire some of the local subs up there. We expect shortages in building supplies in that area in the future, but not particularly in our area here in Orlando, and no shortage of personnel. Ten percent of our workload last year was dealing with the Florida hurricanes, and we only project 5 percent this year.”

The only person reached whose Biloxi company was in the vast area that could be considered Ground Zero, was very fortunate to have escaped major damage. His story is no doubt typical of those in the area: "We were very much affected by Katrina. It’s hard to put into words the devastation. We had just completed the Hard Rock Casino project, which was scheduled to open a few days following the strike of the storm. The casino was entirely devastated. I’m certain they’ll rebuild. We were building a new casino barge from the Isle of Capri, and that barge is now resting partially on land and partially in the water and has been condemned. In fact, we just received a letter yesterday from our GC canceling the project, termination for convenience. I guess the flipside is that many of the up-and-running land-based casino structures that only received 10 to 20 percent damage are trying to put exterior walls back in place and finished so they can remove drywall and replace those with mold and mildew, and bring their hotels and facilities back online.

"The nature of the work here has changed from new, ground-up construction with a number of those projects canceled in favor of trying to patch up and button up existing structures so they can get them back in service. There’s a real "can do” attitude with all of our clients. We’re working on a brand-new hotel that’s never rented a room; we’re closing up the exterior walls and securing it to prevent any further damage and get it online.

"In the coastal region of Harrison County, I’d say 50 percent of the struc-tures were heavily damaged or totally destroyed, needing rebuilding. The Red Cross is putting out some numbers, I think 40 percent totally destroyed and another 20 percent heavily damaged. The buildings that survived were on higher ground—that’s the one common denominator. Our building received only wind damage. The water came very close to us; businesses within a mile of us flooded, and there are homes within a mile that were completely destroyed and lives lost. On our building, only our rolling overhead doors blew out, and we lost some trim around the perimeter. With the exception of telephones, we are essentially operational: the phone company is not projecting permanent phone lines for us until sometime in November. We have Internet because it is cable driven, and we’ve had power now for a week. We were without power for two weeks, so we were operating off generators.

"Currently, we are receiving the supplies we need for reconstruction, but we are starting to hear that they are going to become increasingly difficult to obtain. We’ve ordered a lot of materials to warehouse and try to be ahead of the curve. National Gypsum had a manufacturing facility in New Orleans that was one of the major suppliers for our region, and it’s no longer in operation. So that’s a big problem; we’re trying to locate materials from outside areas.

"Prices are rising steadily. We’ve heard rumors of one particular vendor focused on small home owners and residential contractors, charging 70 percent more for drywall than we were paying in large commercial. But we’ve already received a notice of 10 and 20 percent increases. And that was before Rita! I think they are justifiable increases when the drywall has to come from out-of-town shipments and the price of fuel and all those factors that truly are problems to overcome. The highways serving us, especially from the East, which is where most of our materials come from, have bridges that are out or sections of interstate that are down to one lane, so that greatly adds to the shipment and delivery times. It will take us many years to rebuild the coast. We’re a good six months to a year away from seeing any real relief, and that is primarily driven by the fact that so many of our roads and bridges are damaged and out.

"Most people in this region are very resilient and resourceful. I’ve heard of a business that lost everything because of the storm, but they’ve been able to relocate in temporary facilities and they’re still working. In the construction industry, employment is not an issue: so many people have lost their homes and there is so much devastation that housing for employees is more the problem. Then the thousands of casino industry employees are out of work, so we’re seeing more of a labor force to draw from. Not as skilled as you would need or like, but with lot of the other industries wiped out and employment issues in construction—I think if you wanted a job right now, you could get one! There is a lot of work, it’s just finding a place to live where you’re working.

"Contractors wiped out by storm surge have rented construction trailers, bought new equipment and computers, and they’re operating out of them on their new location with travel trailers, fifth wheelers and motor homes parked right next to their businesses, and they are living out of them.

"What you see in the news media is pretty accurate. Seeing it in person is even worse, so I can’t say that the media is hyping this up. Nobody thought this could happen. I don’t think the United States has ever seen a storm of this magnitude and didn’t think it could happen.”

There’s not much one can do about the roll of the die when it comes to hurricanes, but let’s hope reconstruction includes learning from mistakes, so that we do not rebuild metropolises in fishbowls offering only Category Three protection. Or build within areas subject to hurricane surges, wiping out wetlands and barrier islands that can absorb such surges (for every square mile of wetlands lost, storm surges rise by 1 foot).

At the time this article was written, Hurricane Rita was a day away from landfall in Texas. At about the time we were going to press, a devastating earthquake shook Pakistan. Let’s hope that by the time you receive this magazine, Mother Nature will have decided to take it easy on us and let us all get back to the job of building.

About the Author
Steven Ferry is a free-lance writer based in Clearwater, Fla.