Minnesota highway contractors are bracing for a possible July 1 state government shutdown that could idle hundreds of millions of dollars' worth of work on state roads and bridges.
A shutdown would come at the worst possible time for contractors who work in a seasonal industry that makes most of its money between July and Thanksgiving and employed 7,555 workers as of April.
"We typically don't show profits until well after July 1, closer to Labor Day," noted Tom Stockert, area vice president for Bismarck, N.D.-based Knife River Corp., an asphalt and ready-mix paving company with two divisions in Minnesota.
As they hope for a budget breakthrough and wait for direction from the Minnesota Department of Transportation, contractors are pushing to do as much work as they can before July 1. Some are eyeing alternative work in other states.
MnDOT officials directed calls on a potential shutdown to the Minnesota Management & Budget department (MMB). In a statement, the agency said work is under way on "contingency plans in the event of a possible shutdown of state government" starting July 1.
In the absence of a budget agreement, the statement noted that work under contracts as of July 1 "must be suspended, pending authorized appropriations, as will all payments required of the state of Minnesota under those contracts. "
Affected parties would be notified if contracts are cancelled, the statement said.
John Pollard, an MMB spokesman, said MnDOT and other state agencies are compiling a list of projects they believe need to continue for health and safety reasons.
MMB will forward that list to the attorney general, who will ask a court to approve those as "core services" that need to continue in the event of a shutdown.
"We can't speculate what the courts would rule one way or another," Pollard added. "We are in the early stages of planning and putting it together. "
Tim Worke, director of the Associated General Contractors of Minnesota's Transportation Division, said the possibility of a shutdown will become a concern "as we move through the month of June with no agreement on the budget. "
Shutting down state road projects would likely need to start ahead of the July 1 deadline for a budget deal. Highway contractors need time to make construction zones safe for travel once work is idled, Worke noted.
A shutdown would put MnDOT inspection staff members on furlough, and no over-dimension and overweight permits would be issued, so there would no way to "legally transport heavy construction loads to job sites," Worke added.
George Mattson, president of Shafer Contracting, a highway contractor in Shafer, Minn., said contractors are waiting for direction from MnDOT.
"If we have to shut down, we have to shut down," Mattson said. "There will have to be some guidance as to how we maintain traffic through some of these projects. "
Numerous projects across the state could be affected.
MnDOT's 2011 construction program includes 258 new and ongoing projects valued at $900 million. In May, MnDOT announced another $398 million worth of improvements over four years to state roads rated as "poor. "
In 2005, then-MnDOT commissioner Carol Molnau warned state lawmakers about the consequences of a state government shutdown that year.
Molnau said at the time that a shutdown could cost MnDOT "millions," adding that the department would be responsible for interim traffic and erosion control, demobilization and remobilization costs, and other expenses.
Based on the assumption that state highway projects would not be classified as core state functions, Molnau warned in 2005 that 175 highway projects in progress would be shut down and another 21 scheduled for letting would be "significantly delayed. "
As it turned out, a "lights on" provision kept highway projects rolling in 2005, but "we are told informally that isn't likely to happen this time around," Mattson added.
Stockert, of Knife River, said the feeling is that a shutdown could be a long ordeal.
"This one sounds like it could drag on more than a month," he said.
Ironically, Knife River's Central Minnesota Division's had a higher-than-usual percentage of its work in North Dakota last year, Stockert said.
North Dakota projects look pretty good right now, given the uncertainty in Minnesota. One option the company is looking at is pursuing more work in North Dakota.
Knife River's current Minnesota projects include improvements to Highways 30 and 83 in Blue Earth County, and a $14.4 million Highway 212 project in Renville and McLeod counties.
Part of the focus now is to have Minnesota projects "at a stage they can be safely and economically idled," Stockert said.