For the Tucson Citizen
Bill Valenzuela has laid off about a third of his employees over the past year.
Valenzuela is the owner of WG Valenzuela Drywall Inc., a stalwart of Tucson’s construction industry founded in 1979. He said he saw trouble coming, and had been planning for it.
“We didn’t know the housing industry was going to hit us with a loan problem, but we knew things were getting overbuilt and construction was going to slow down,” he said. “We had 16 fabulous years and we were able to stash over $2 million for a rainy day.”
But the job cuts were still needed.
“We usually have between 340 and 360 employees, and in 2006 we did $26 million in sales,” Valenzuela said.
“But in 2007 we did $15 million. And we laid off 240 employees.”
Arizona’s overall unemployment rate held steady – and below the national level – as 2008 began, but not in the construction industry.
From December to January, the construction sector statewide lost 5,300 jobs, a 5.3 percent drop, continuing a five-month trend, according to the latest employment report from the Arizona Department of Commerce. The sector lost just over 20 percent of its work force in 2007.
Pima County lost 1,000 construction jobs from December to January and has lost 2,500 since last June. The Commerce Department projects 2,200 construction jobs will be lost in Pima County in 2008 and 500 more in 2009, before things start looking up.
Valenzuela Drywall, which specializes in residential projects, has had to lower its prices, even as costs for fuel and materials keep climbing, because customers don’t have as much money and can’t afford to pay as much. Valenzuela said he has been able to stay afloat by expanding into commercial construction.
Commercial builders are not hurting as much as residential builders, said David Pittman, director of the Arizona Builders’ Alliance. The alliance represents 170 commercial construction companies in southern Arizona, including general contractors, subcontractors and service organizations.
“All of our guys are busy, let’s put it that way,” Pittman said. “We’re holding steady and I haven’t heard of anybody laying people off. If anything, the commercial builders have hired people that have been laid off on the residential side.”
Residential construction grew so fast for so long, especially in areas such as Vail and Sahuarita, that commercial construction has lagged behind. And government-funded construction of necessities such as fire stations and schools is still needed.
“There was so much home construction, commercial couldn’t keep up,” Pittman said. “This slowdown allowed us to catch up and draw even.”
Darrel Estabrook, co-owner of Architectural Stairs and Products Ltd., finds himself far busier than he was before the housing slump, but he’s not necessarily happy about it.
“I’m working harder because my help is gone,” Estabrook said.
The company is down to six employees, from 10, and is getting work, but in custom homes rather than tract homes. Estabrook said skilled labor is hard to come by.
“You can’t just hire a guy and say, ‘Go over there and build this spiral staircase.’ It’s the repetitive stuff that really trains my guys to be good carpenters,” he said. “I feel like we are back where we started.”
The stair-building firm has also branched out, taking on floor installations and commercial jobs to fill the holes left by dwindling residential construction.
Although he has less time for his teenage sons and less time and money to take spontaneous trips with his wife, Sue, who is a travel agent, Estabrook is still optimistic.
“I think things will get better,” he said. “I’d sure like to see it.”
Pittman also has hopes – that the residential sector will rebound and that the commercial side won’t see a downturn.
“Much of the financing for much of commercial was done some time ago, so there may be a lag,” he said. “But we cross our fingers. There’s an old saying: Commercial construction follows the rooftops.”
Valenzuela said he has been able to start hiring back workers, thanks to commercial projects, but he warns them that they should stay in other jobs if they think they have a future there. He believes even the commercial side has peaked.
And letting go of workers is painful emotionally.
“I’ve gone through about three recessions, and my people never realized it because we plan ahead. We don’t try to break even, we just try to make sure we survive,” he said.
This time is different, and the consequences extend beyond the company. Valenzuela said his wife gives around $25,000 every year to small charities, and his company donates between $40,000 and $60,000. That’s no longer possible.
“I wish there was somebody out there with a magic wand to tell us what to do next,” he said.
David Drennon, spokesman for the state Department of Commerce, is optimistic.
“We may be slow, but in reality the state is still growing,” he said. “We need to find a solution to help keep those jobs in the state.”
Drennon pointed to a proposed $1.4 billion economic stimulus package involving construction at the University of Arizona, Arizona State University and Northern Arizona University.
“Economic development groups are passing resolutions to get the universities to move forward with infrastructure projects they have already planned,” he said. “The expectation is it would help create new jobs.”
Projections show the Stimulus Plan for Economic and Education Development has the potential for 30,000 jobs, he added.
Tucson Regional Economic Opportunities Inc. endorsed the resolution, which is being drafted, on March 21, said spokeswoman Laura Shaw.
Shaw said the plan has been reviewed in legislative committees, and is expected to be decided on at the state Capitol next month.
“This addresses both problems with one solution,” she said. “We’re also, however, focused on diversifying our economy. Because economies in general, when they rely on just a few industries, in the long term it’s not healthy.”
At age 75, Valenzuela said he could retire any time he wants. His kids are in the business and taking over.
Valenzuela recently had three employees attend a trade show in Las Vegas to look for better ways of doing things.
“We’re very worried, but I try to tell my kids not to let worry get them into a problem,” he said. “You’ve got to keep planning for tomorrow and the following day.”
UNIVERSITIES’ STIMULUS PLAN: KEY FACTS
By 2020, Arizona will require 30,000 college graduates a year, as an estimated 260,000 new jobs in Arizona will demand a degree in higher education, and about 167,000 jobs will be lost to retirement.
WHAT UA WOULD GET
• Groundbreaking on $90 million environment and natural science building.
• $12 million renovation of Centennial Hall. (Private donors would provide some of the money.)
• New $44 million building for the College of Social and Behavioral Sciences.
• New $70 million engineering research building.
ARIZONA ECONOMIC IMPACT
• Creation of 14,000 construction jobs and another 16,000 jobs indirectly.
• $1.9 billion will be added to the state’s Gross Domestic Product.
• $1.4 billion would added to to Arizonans’ household income.
• $140 million would be generated in state and local tax revenue.
• Nearly $327 million would be released into the southern Arizona construction economy over three years.
Source: University of Arizona
RESIDENTIAL BUILDING PERMITS
Building permits for single-family residences issued in the Tucson area in the first quarter:
Source: The Southern Arizona Housing Market Letter and SAHBA