{' '} {' '}
Limited time offer
SAVE % on your upgrade.

Page 1

2020 FORECAST ISSUE

INSIDE: UCLA Anderson Forecast 'Back to the Future' with CalAPA predictions CalAPA's 10th annual 'Better or Worse' survey


COMPLETE TOUGH MILLING APPLICATIONS WITH PRODUCTIVE RESULTS

CUTTING WIDTH

4.02 ft

OPERATING WEIGHT

48,153 lbs

HORSEPOWER

325 hp

Cat® PM312 Cold Planers The new PM300 models with a track undercarriage combine enhanced production capabilities, optimized performance and simplified service to complete tough milling applications with productive results. For more information, contact your nearest California Cat dealer today.

www.hawthornecat.com San Diego 858-674-7107

www.holtca.com Central Northern California 888-294-9778

www.petersoncat.com Bay Area & Northern California, Oregon, and Southwest Washington 844-349-4353

www.quinncompany.com Central & Southern California 888-842-2155

© 2019 Caterpillar. All Rights Reserved. CAT, CATERPILLAR, LET’S DO THE WORK, their respective logos, “Caterpillar Yellow”, the “Power Edge” and Cat “Modern Hex” trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar and may not be used without permission. www.cat.com / www.caterpillar.com


SMOOTH SURFACES sustainable solutions Bakersfield Bakersfield, CA 661.387.6090

Corona Corona, CA 951.277.7620

Fresno Fresno, CA 559.834.4420

Sacramento Sacramento, CA 916.504.2300

San Diego Lakeside, CA 619.441.3690

San Leandro San Leandro, CA 510.357.9131

Turlock Turlock, CA 209.410.6710

facebook.com/volvoces instagram.com/volvoces twitter.com/volvoces

Construction Equipment & Services

www.vcesvolvo.com

Volvo Construction Equipment makes paving any road easy. With efficient machinery and a suite of robust features to ensure a consistent and level surface, you can trust any project will be smoothly finished and built to last. Find the paving equipment you need at VCES.


Publisher’s Letter Dear Readers: Welcome to the annual forecast issue of California Asphalt magazine. As the incoming chairman of the association, I’m pleased to introduce one of the many tools and services the association offers its members to help us better understand our industry, identify important trends, and be prepared for the inevitable changes and challenges that lie ahead. The CalAPA® Board of Directors recently reviewed and updated our association’s strategic plan, laying out strategies for how we will focus our efforts, and keep our industry strong at the outset of this new decade. The themes in the plan will no doubt sound familiar, and are embodied in an acronym: “PLAN.” The letters represent the words Promotion, Learning, Advocacy and Networking. First and foremost, we will be leaders in promoting asphalt pavements in California. This may involve sharing information about how asphalt pavements are made and placed, our many sustainable attributes, and how asphalt provides long-lasting durability and value to our customers. Asphalt has been the roadway of choice in California for over a century. We do not stop at simply promoting our product, we will also focus on promoting the industry itself as a great place to work, with lots of upward mobility, excellent pay and benefits and a sense of camaraderie with seeing tangible results at the end of each workday. The “L” stands for “Learning,” and encompasses the vast array of technical and practical knowledgesharing activities deployed by our association, including our conferences, webinars, classes, technical meetings, publications and other communication channels. Our world is constantly changing, and we rely on our association to keep us on top of all the changes facing the asphalt industry. “A” in our “PLAN” represents our robust Advocacy mission. Our lobbyists in Sacramento, and our national partners in Washington, D.C., maintain constant vigilance against bad ideas that some believe would make good laws. We will continue to help educate elected officials so they have a better understanding of our industry and its contribution to jobs, the economy and the quality of life in our state. We inform and empower our members to carry forward this information at the city and county level, further amplifying our message, and increasing our ability to steer the direction of the asphalt industry. Finally, the “N” in PLAN is for Networking. This business is all about people. Even though many of us may be competitors, we share a healthy respect for each other and come together as an association to foster mutual goals for the betterment of the entire industry. CalAPA® members adhere to a Code of Ethics, strict Conflict of Interest policies, and are committed to fair dealings with each other and our customers. We also celebrate the contributions of those leaders who have mentored us and built the foundation upon which we stand today. The asphalt business is like a big family. Everyone knows everyone, and we not always agree. But in tough times, we have rallied together to protect the family and, in doing so, have achieved great things. Two recent examples that come to mind are the fight to pass, and then defend, SB1, the $50 billion state road-repair bill, and also our successful defense of our industry in the face of Proposition 65 nuisance lawsuits. Looking ahead, we will continue to help our members succeed, and contribute to the success of our customers, in particular our local, state and federal government partners. We will continue to be a positive stakeholder in the communities in which we live and work. And finally, we will continue to be a valuable source of information and insight available nowhere else. At least, that’s our PLAN. Sincerely,

Scott Fraser R.J. Noble Company Operations Manager

4

California Asphalt Magazine • 2020 Forecast Issue


Contents Volume 24, Issue 1

Chart 8 California Home Sales (NSA) 460,000

4

440,000

Publisher’s Letter

420,000 400,000

8

380,000

The UCLA Anderson Forecast

360,000 340,000

14

‘Back to the Future’ with CalAPA predictions

20

CalAPA’s 10th annual ‘Better or Worse’ survey

24

Asphalt pavement market outlook for 2020 and beyond

28

2020 Annual California Asphalt Pavement Conference at Disney's Grand Californian Hotel® & Spa

32

CalAPA 2019 Annual Golf Classic

34

Industry News

320,000 300,000

2016

2018

Page 8

Source: California Association of Realtors

WORSE

BETTER

STATE LOCAL PRODUCER

REFINER SUPPLIER PAVING CONTRACTOR

STATE LOCAL PRODUCER

REFINER SUPPLIER PAVING CONTRACTOR

Page 20

On the Cover:

Cover illustration by Aldo Myftari of Construction Marketing Services. Blackboard equations courtesy of CalAPA® Technical Director Brandon Milar, P.E.

Page 32

CALIFORNIA ASPHALT PAVEMENT ASSOCIATION www.calapa.net

HEADQUARTERS: P.O. Box 981300 • West Sacramento • CA 95798 (Mailing Address) 1550 Harbor Blvd., Suite 211 • West Sacramento • CA 95691 • (916) 791-5044 EXECUTIVE DIRECTOR: Russell W. Snyder, CAE, rsnyder@calapa.net TECHNICAL DIRECTOR: Brandon M. Milar, P.E., bmilar@calapa.net REGIONAL DIRECTOR: Bill Knopf, wknopf@calapa.net • (909) 400-9697 MEMBER SERVICES MANAGER: Sophie You, syou@calapa.net GUEST PUBLISHER: Scott Fraser, R.J. Noble Company, Operations Manager PUBLISHED BY: Construction Marketing Services, LLC • (909) 772-3121 P.O. Box 892977 • Temecula • CA 92589 GRAPHIC DESIGN: Aldo Myftari CONTRIBUTING WRITERS: Jerry Nickelsburg, Director, UCLA Anderson Forecast, Adjunct Professor of Economics, UCLA Anderson School, David Shulman, Senior Economist, UCLA Anderson Forecast, Russell W. Snyder, CalAPA® and Brian Hoover, CMS ADVERTISING SALES: Kerry Hoover, CMS, (909) 772-3121 Copyright © 2020 – All Rights Reserved. No portion of this publication may be reused in any form without prior permission of the California Asphalt Pavement Association. California Asphalt is the official publication of the California Asphalt Pavement Association. This bimonthly magazine distributes to members of the California Asphalt Pavem­­ent Association; contractors; construction material producers; Federal, State and Local Government Officials; and others interested in asphalt pavements in California and gaining exclusive insight about the issues, trends and people that are shaping the future of the industry.

6

California Asphalt Magazine • 2020 Forecast Issue


HERRMANN EQUIPMENT, INC., AND STRIPE ‘N’ SEAL, INC. / AARON PAVING Right: Stripe ‘N’ Seal, Inc. / Aaron Paving team paving a shopping center parking lot with their new Carlson CP85 paving machine purchased from Herrmann Equipment.

Stripe ‘N’ Seal / Aaron Paving CSLB #308128 has been meeting the asphalt maintenance demands in the North Bay Area for 44 years. They have built their highly valued customer-oriented reputation by consistently providing the highest quality and best value to their customers in both the public and private sector. Mechanic, Dan Fowler had been working with another paver brand for the past 20 years and after facing continual downtime and delays, Fowler decided to begin the search for a new paving machine. “It is always difficult to switch from something you have become accustomed to, but after going through several previous paving machines and continually facing cleaning and maintenance issues, we knew it was time for a change,” says Fowler. “With our previous brand, the crew and transport trucks were delayed as it became necessary to unbolt and disassemble areas of the paver to clean flights and free rollers.” Fowler’s search for a new paver ended when he discovered the Carlson CP85 Paver from his local distributor, Herrmann Equipment. “We met with Matt Herrmann of Herrmann Equipment and Jeremy Witter with Carlson Paving Products and after witnessing the benefits firsthand, we decided to make Herrmann Equipment and Carlson Pavers a part of our team,” continues Fowler. “The post cleaning process alone was saving us 20 minutes a day, and that our production and finished product was far superior.” Fowler points to features like the heated end gates that greatly enhanced their edge matching appearance, as well as the larger augers that moved more material in less time. “The Carlson CP85 paving machine pushes piles and trucks easier, with a truck bay design that reduced our spillage,” says Fowler. “Our maintenance and wash down pump issues have also been solved, while the horizontal sliding damper doors have reduced accidental obstruction strikes. Our foremen are also reporting that we are safely minimizing the amount of handwork on the jobsite. Everyone is very happy with our new paving machine as they wear their new Carlson jackets out on the jobsite with pride.”

SALES • SERVICE • PARTS • RENTAL

NORTHERN CALIFORNIA (916) 783-9333 9220 VIKING PLACE, ROSEVILLE, CA 95747

SOUTHERN CALIFORNIA (909) 877-5597 2711 LILAC AVE., BLOOMINGTON, CA 92316


The UCLA Anderson Forecast for California

California enters the next decade with full employment and slowing growth By Jerry Nickelsburg

INTRODUCTION In the California Report of late we have been following two trends. First, California unemployment rates, particularly in the largest job markets in the state, are extremely low. Therefore, it follows that the rate of hiring should slow down. Through April of this year, that had not happened. Indeed, the rate of hiring for non-farm payroll jobs increased by 0.2 percentage points from 2018’s hiring rate. At some point capacity constraints become binding, and with the October job numbers in place, there are indications that this has occurred. Second, the pace of growth in the United States is slowing. The 2nd and 3rd quarter estimates from the United States Bureau of Economic Analysis are for around 2 percent annual rate of growth. California has now caught up (caught down?) with GDP growth slowing considerably. It is now running at approximately 2.6 percent per annum on a year-over-year basis. At present, and in spite of the trade tensions between the United States and China, the economic news remains positive. For example, the July countywide unemployment rates from Marin to Santa Clara are below 2.2 percent; from Sonoma through the East Bay are below 2.7 percent; and in Southern California, Orange and San Diego Counties are at 2.8 percent. All are below the U.S. rate of 3.6 percent. To be sure, Los Angeles and the inland regions are not doing as well by this measure but, unemployment rates are falling there as well. In this California Report we review the output, employment, housing and trade statistic, and present the prospects for the coming two years. Since National economic growth is slowing at a slower rate than forecast three months ago, the California forecast is now slightly stronger than predicted last September. EMPLOYMENT RETROSPECTIVE After bumping up to 4.3 percent last April, the unemployment rate has fallen to 3.9 percent, very much in the neighborhood of full employment. Part of this was due to a reduction in the labor force and 8

California GDP

(SA, Logrithmic Scale)

2014

2015

2016 QUARTERLY

2017

2018

2019

MONTHLY

Source: BEA.gov, UCLA Anderson Forecast

partly due to additional job creation. It is likely, as labor demand in the state has remained strong, that the April labor force number was measurement error, rather than the lower labor force reported representing 200,000 more discouraged workers. After slowing last year to a monthly average of 23,000 net new non-farm payroll jobs, hiring increased to an average of 26,600 net new jobs per month through the first 10 months of this year. Although overall job growth in the state has remained robust through October, the high valueadded sectors;information, professional and business services, and construction, grew at a smaller percentage over the three months ending in October 2019 compared to the previous three months. Growth in the lower value-added sectors of leisure and hospitality, wholesale trade, and other services has also slowed. The balance has been made up by faster hiring in government, temp and administrative services, finance, private education, and durable goods manufacturing. This shift in the sectoral component of job growth is the reason why California GDP growth is slowing even though non-farm payroll job growth is not. As these are not usually fast-growth sectors, it suggests the more rapid job growth of the past year is abating. California Asphalt Magazine • 2020 Forecast Issue


One can view this as a kind of “trickle-down” with support services receiving the benefit of previous growth in the high-value added sectors. Although we do not know if this will continue or reverse, with slower national and international growth, our thinking is slanted towards a continuation of this trend. Healthy labor markets in California are also geographically widespread. In the last 12 months, with the exception of Los Angeles and Sacramento, California’s major population regions experienced job growth in excess of 2 percent while the U.S. outside of California experienced only 1.35 percent growth, the same as Los Angeles. The risks to continued rapid growth continue to be the high cost of housing and the Administrations restrictions on international immigration. The Anderson Forecast measure of monthly GDP for the state shows continued, but slowing growth. There is a clear flattening of the slope of the monthly line reflecting the slowing of the California economy from 3.5 percent growth rate to 2.6 percent growth. This is still above the U.S. rate, and while we expect further slowing of the California economy as part of the U.S. economic growth slowdown in 2020, this differential is expected to persist. This is because the weakness in the U.S. economic outlook is due in part to weakness in autos, and California is less exposed to that sector than many other states. Under our assumption of increased imports and exports, California’s logistics industry is due to grow more rapidly than the rest of the United States, and California’s tech industry, particularly in the southern part of the State should continue faster than U.S. growth rates. HOUSING MARKET RETROSPECTIVE In the last two California reports we presented analyses of California’s soft housing market and attributed the softness to expectations of slower price appreciation and possible interest rate cuts. With the recent decline in interest rates, the eight-month softness in housing markets seems to be over. Nevertheless, there is not a return to “normal” housing markets. The sale of single-family detached homes has been relatively flat at 400,000 these past four months, and is now resting 3.6 percent below the 2015-2017 historical average as well as 2.6 percent below the September/October average for the same period. Median home prices have also stalled. Although up from one year ago, over the past six months there has been little to no appreciation in median values. It appears that the falling mortgage interest rates through the Spring of 2019 pushed up home prices but did little to revitalize the real estate market. California Asphalt Magazine • 2020 Forecast Issue

Chart 8 California Home Sales (NSA) 460,000 440,000 420,000 400,000 380,000 360,000 340,000 320,000 300,000

2016

2018

Source: California Association of Realtors Chart 9 California Median HomePrices ($000) 700000 600000 500000 400000 300000 200000 100000 0 2016

2017

2018

2019

Source: California Association of Realtors

With little long-run price appreciation, flat existing real estate sales, and nervousness about the near-term future of housing markets, residential construction continues to languish. The annual rate of building has remained in the 100,000 to 115,000 rate since summer began. When one considers the fact that some of these permits were for rebuilding homes lost in natural disasters, the State has clearly fallen behind in home production relative to population growth and future needs, and this is not expected to change any time soon. Even though there are moves afoot to increase housing production in the state Legislature and in City Halls in some jurisdictions, our forecast is for a modest increase in the level of building followed by increased slack when the U.S. economy softens in late 2020, and then followed by a slow recovery of home building through 2021. There are several reasons for this. First there are capacity constraints in building. With elevated employment levels in construction, it is difficult to ramp-up to much higher levels in the short-run. Therefore, easing the permitting process in the face of an inelastic short-run supply, will have only modest impact. 9


Monthly California New Residential Permits (3 Mo. Moving Average, No. of Units) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -

2010

2011

2012

2013

2014

2015

2016

Source: U.S. Department of Census

TRADE AND TRADE WARS Trade wars are on everyone’s mind with respect to the economy. California, with large ports and supporting logistics industry, is more vulnerable to a direct impact than in other parts of the United States, at least as far as trade disputes with China are concerned. The trade wars have indeed had an impact on California the past three months, but with respect to employment, not by much. Total goods movement for the three months ending in October 2019 through the ports of Long Beach, Los Angeles and Oakland are down by 4.5 percent relative to the previous year. International air cargo at LAX and SFO is down by nearly 10 percent for the same period. Cargo movements through Ontario and Oakland airports, which are distribution centric airports, are also down over the past three months. Nevertheless, employment in the transportation, warehousing and utilities sector has not dropped significantly since summer. Though there is some cause for worry, particularly with the potential for increased trade tensions, at present the shift from brick-and-mortar to online retail has kept the trade war disruption from having a major impact on employment in the logistics industry. In addition, the backlog of demand for warehouse space, has kept absorption of new industrial buildings at high levels. To be sure, without the trade wars this industry would have grown, but at present it is holding its own. Although we do not expect significant disruption of trade between the United States and the industrial centers of Asia in the future, the possibility remains an important risk of the forecast. 10

THE FORECAST

The U.S. forecast update in December represents very modest changes to the outlook since the previous update last September. The weakness in housing still persists and we have lowered slightly the housing production forecast for 2020. The less pessimistic U.S. economic forecast for 2020 is reflected in the present forecast. The increase in the unemployment rate for the end of 2020 and the beginning of 2021 is a 2017 2018 2019 consequence of the slower growth during this period. It is followed by a rebound in economic growth and hiring in 2021. For the entire years 2020 and 2021 we expect average unemployment rates of 4.3 percent and 4.6 percent, respectively. Our forecast for 2020 and 2021 is for total employment growth rates to be 0.9 percent and 1.3 percent. Payroll jobs are expected to grow at a 1.9 percent and 0.9 percent rate, respectively. This reflects the stronger growth in payrolls over the last year, even while total employment growth was weaker. Real personal income growth is forecast to be 2.1 percent and 1.9 percent in 2020 and 2021. The continued growth in real personal income in 2020 is reflective of the changing mix of employment in California and tight labor markets in high wage occupations. Homebuilding will be lower by about 5,000 units in 2020 than previously forecast, but we remain optimistic with regard to 2021 new residential construction. Needless to say, weakness in home building, even with the new eased regulations and zoning, means that the prospect for the private sector building out of the housing affordability problem over the next three years is nil. CA Jerry Nickelsburg is the director of the UCLA Anderson Forecast and an adjunct professor of economics. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management. The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623.

California Asphalt Magazine • 2020 Forecast Issue


A NEW KIND OF POWER TOOL

MADE FOR HIGHWAY MILLING Roadtec mills combine power with durable construction and flexibility. The 1050 horsepower RX-900 offers superior material evacuation, ACE™ Automated Control of Elevation, and Auto Cut™ entry making it your best choice for milling.

Dedicated to Your SuccessSM

See the full range of products at roadtec.com

© 2020 ROADTEC. INC. ALL RIGHTS RESERVED

1.800.272.7100

1.423.265.0600


The UCLA Anderson Forecast for the Nation

The two track economy

By David Shulman

We have become a bit more optimistic since our last forecast. Several of our worries have been mitigated. They include: • •

• • •

After being locked in a 21-month trading range, stock prices have broken out and made decisive new highs. The Fed cut its policy rate by 25 basis points and is supplying additional reserves into the banking system to solve a “plumbing” problem. Although the purpose of supplying additional reserves is not a new quantitative easing program, it might have the same effect with respect to the financial markets. The yield curve has returned to a positive slope. Although a yield curve reversal usually occurs prior to a recession, the shortness of the inversion period might very well mute its recession signal. Housing activity doing better than previously forecast. Better than anticipated employment growth revealed by the October jobs report signaling somewhat faster growth going forward. There is less pessimism on both an interim U.S.-China trade deal and passage of the USMCA trade treaty with Mexico and Canada.

As a result, we are backing away from our long-held forecast of a 3-2-1 economy where real GDP growth on a fourth quarter – fourth quarter basis would be 3 percent in 2018, 2 percent in 2019 and 1 percent in 2020. We now anticipate that growth in 2020 will be 1.7 percent compared to 1.25 percent previously. So, call it roughly a 3-2-2 forecast with 1.9 percent growth in 2021. But make no mistake there remains a significant risk of recession in late 2020, albeit somewhat less than we previously thought. For those who say that we can’t have a recession in a presidential election year, I would note that recessions occurred in 1960, 1980, and 2008; all presidential election years. For the past year economic performance has diverged as strong consumer spending has masked significant weakness in business investment. You can characterize this as a two-track economy. This result is somewhat surprising because most observers including us had assumed that the significant reduction in business taxation coming from the 2017 tax act 12

would spur a capital spending boom. Obviously, that has not occurred as growing trade tensions have made it difficult for businesses to plan ahead especially with respect to global supply chains. Indeed, real business fixed investment actually declined in both the second and third quarters of this year. Nevertheless, we think the worst is over and we anticipated a modest recovery over the next two years. Aside from strong spending on intellectual property, the outlook for overall business fixed investment growth will remain modest with actual declines in structures investment which is being dampened by weak spending in the oil patch. We would note that the strong increase of 4.1 percent in the first quarter of 2020 is due to our assumption that Boeing begins to ship its long grounded 737-Max airplane to airline customers that quarter. Unemployment Rate, 2011Q1 -2021Q4F, Percent, SA 10% 9% 8% 7% 6% 5% 4% 3%

2012

2014

2016

2018

2020

Source: U.S. Bureau of Labor Statistics and UCLA Anderson Forecast

As was mentioned above we believe that the economy will remain on a 2 percent growth path from 2019 – 2021. In this environment payroll employment growth will decelerate from the 170,000/month averaged this year through October to about 80,000/ month in 2020 and 50,000/month in 2021. Temporary census hiring will positively affect the data in the second quarter and negatively affect it in the third quarter of next year. In our view the unemployment rate will bottom at 3.4 percent in the second quarter of 2020 and then gradually rise to 3.8 percent by late 2021. California Asphalt Magazine • 2020 Forecast Issue


HOUSING ACTIVITY PLATEAUS Housing activity continues to be range bound between 1.25 million and 1.3 million starts. Although this level of activity is more than double the lows reached during the Great Recession it still remains somewhat below the long-term historical average of 1.4-1.5 million units and well below the 2 million plus years associated with booms. Although our current forecast can be characterized as tepid it is 6 percent and 4 percent above what we forecast just three months ago for 2020 and 2021, respectively.

Housing Starts, 2011Q1- 2021Q4F, Thousands of Units, SAAR 1,400 1,200 1,000 800 600 400 200

CONCLUSION We modestly upgraded our forecast from last quarter to reflect improved financial conditions, a better housing and employment outlook, some relaxation of trade tensions and a modest improvement in business fixed investment. As a result, instead of forecasting 1 percent real growth for 2020, we expect growth to be on the order of 2 percent on a fourth quarter to fourth quarter basis. After going on a separate track from business investment, we forecast a slowdown in consumer spending largely coming from much weaker automobile sales as credit tightens in that sector. Overall, the interest rate environment, aside from auto credit, will remain benign. But make no mistake, although we have lowered the risk of a recession, the second half of 2020 remains problematic for the economy. CA David Shulman is a visiting scholar/senior economist at the UCLA Anderson Forecast. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management.

0

2012

2018

2020

Real GDP Growth Developed World vs. U.S. 6

(5-Yr. % Ch.)

5 4 3 2 1 0 2000

2005

2010

U.S.

2015

2020

Developed World

Real Export and Import Growth

14 4.5

2016

Source: U.S. Department of Commerce and UCLA Anderson Forecast

The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623. Real GDP Growth

2014

(4-Qtr. % Ch.)

12

(4-Qtr. % Ch.)

10

4.0

8

3.5

6

3.0

4

2.5

2

2.0

0

1.5

-2

1.0

2000

2005

2010 Exports

0.5 2010

2012

2014

2016

2018

2015

2020

Imports

2020

California Asphalt Magazine • 2020 Forecast Issue

13


'BACK FUTURE' with CalAPA PREDICTIONS ®

By Russell W. Snyder, CAE

n the 1989 film “Back to the Future Part II” a sports almanac spanning the years from 1950 to 2000 plays a central role in a convoluted (and comical) story about time travel and how an unscrupulous character travels back in time and uses the almanac to bet on games and amass an illicit fortune (shame on you, Biff Tannen!). The sports almanac depicted in the film was a fictional movie prop, by the way. While time travel doesn’t exist (yet), peering into the future something the California Asphalt Pavement Association does on an almost daily basis. As our members are dealing with the urgent, day-to-day challenges of operating a business in the asphalt pavement industry, our association looks over the horizon to identify trends, threats and opportunities. Armed with that information, we share that insight with our members, and when appropriate, we also take steps to influence those future outcomes. It’s not exactly like betting on a race that’s already been run, but you get the idea. The process of developing this insight we cast a wide net for information from our member companies, their customers, agencies, economists and others. We analyze it, compare it to past trends, and then do our best to inform our members of likely 14

events in the future so that they can prepare for them. Since we live in the Information Age, we are awash in raw data to the point of almost drowning. Our purpose is to distill this information into targeted insight to help our members make smart, strategic business decisions. This very important member benefit gives companies an advanced warning so that they can prepare, which may involve making investments in equipment purchases or training, or revising procedures to comply with new regulations. In any case, the earlier we can provide this level of insight, the better. In our meetings with public owners, we are constantly listening for what expectations they have for our product now and in the future. After all, we want to be responsive to what our customers want, so it is important we are always listening to their concerns and expectations. Just one example of this futurelooking orientation is Environmental Product Declarations. They started emerging as an issue in the middle of the last decade, and it was clear they were migrating to asphalt. CalAPA® covered this topic extensively in our newsletter and in meetings of our Environmental Committee. In 2017, we put the issue on the cover of our association magazine, California Asphalt. By this time Caltrans and some local agencies had been expressing an

interest in the topic, and asphalt industry experts had been participating in meetings and conferences to flesh out a practical approach to EPDs and the underlying Product Category Rules. As we wrote in the magazine in 2017, “Environmental Product Declarations (EPDs), which seek to provide detailed information about a product’s impact to the environment over its lifecycle, continue to grow in prominence in California and nationally. Project owners are increasingly looking to EPDs to better understand how their projects, and the materials used to build them, may affect the environment and incorporate more sustainable choices into product decisionmaking. The topic has also attracted the attention of legislators and regulators.” This report was a full two years before any products with EPD language appeared in pavement projects advertised by the California Department of Transportation, which the article reported was considering including EPDs in pilot projects. In 2018 and 2019, CalAPA® continued to stream information about EPDs to our members via its weekly newsletter, a webinar, presentations at CalAPA® conferences and other means. We saw the future and shared that knowledge far and wide. [ Continued on page 16 ]

California Asphalt Magazine • 2020 Forecast Issue


We have you covered! Delivering consistent, professional quality and superior service to the asphalt industry for over 25 years, Diversified Asphalt is southern California’s leading seal coat manufacturer and asphalt service provider. From quality seal coat products and subcontracting support to equipment rentals and more, turn to Diversified Asphalt Products for exceptional service and lasting value. Subcontracting Division • Full Service Oil Spreading • Paving Fabric Installation • Tack & Prime Coat • Fog Seal • Crack Filling Equipment Rental • Hot Crack Filling Machines • 600 Gallon Seal Tanks • 6,000 Gallon Yard Tanks • 6,000 Gallon Job Site Tanks

Manufacturing Division • OverKote® Seal & Crack Filler • SS1H Emulsion • Paving Fabric Rolls • Petrotac and Geotextiles • Oil Flow and Oil Spot Sealer • Latex Additives • Hot Soup Buckets • Diamond Shield Fortifier

DIVERSIFIED ASPHALT PRODUCTS 1227 NORTH OLIVE STREET • ANAHEIM, CA 92801 TOLL FREE: 855-OVERKOTE • 855-683-7568

diversifiedasphalt.com


[ Continued from page 14 ]

We fully recognize that sometimes our members are not ready to receive that information. To use the EPD example again, periodically we receive a panicked call from a member who encounters EPD language in a project they are bidding. They need to know everything about EPDs, and fast. We’re happy to share the information previously sent out to them, and direct them to numerous resources on the topic. This forecast issue of our magazine is another example of how we gather information germane to our industry, distill it, and present it in (we hope) a user-friendly manner. “News you can use,” as we like to say. In addition to the macro UCLA Anderson Economic Forecast for California and the nation, we drill down with information gleaned from our exclusive “Better or Worse” survey, now in its 10th year, to get a sense of the mood of our members and agency partners about the year ahead. Economists will tell you that the mood of consumers has a direct bearing on economic activity. Another “future-oriented” feature that has run in our weekly newsletter for the past several years is our completely subjective and unscientific “Top 10 predictions of stories that will be making news in the asphalt industry in California” in the coming year. We certainly don’t have a crystal ball, but we’ve had a pretty good track record of predicting things that had not yet happened, with a couple of notable exceptions. In January of 2015, for example, we predicted the ongoing “brain drain” of personnel at public agencies, difficulties with new Caltrans specifications and the continuing improving economy. We also hit a bullseye in predicting that Congress would deliver some sort of surface transportation bill, spearheaded by our own U.S. Senator, Barbara Boxer, although 16

it was much more modest than we had hoped. In 2016, we predicted the California Legislature would finally come together on a comprehensive state transportation funding plan and raise the state fuel tax, which had not be increased since the early 1990s. We whiffed on that one. We did a bit better in predicting continuing difficulties with a new Caltrans pavement smoothness specification. Ultimately, Caltrans reversed course two years later and, working with industry, rewrote the specification. We did not predict, however, that Caltrans would present us with an award for our contributions on pavement smoothness. It was a pleasant surprise. Perhaps burned by our incorrect prediction on getting a comprehensive state transportation bill through the Legislature, in January of 2017 we predicted that no such bill would make it through the Legislature that year. DOH! A confluence of factors converged in the Spring, and Senate Bill 1, authored by state Sen. Jim Beall, D-San Jose, the $50 billion “Road Repair & Accountability Act of 2017” squeaked through the Legislature with nary a vote to spare, and was signed into law by Gov. Jerry Brown. We were never so happy to be wrong. Our other predictions in 2017 fared better, including our take on the continuing downward pressure on oil prices, workforce development concerns, legal battles over California’s new prevailing wage law and Reclaimed Asphalt Pavement specifications. In 2018, another clunker: We predicted that an SB1 repeal measure would fail to gather enough signatures to qualify for the statewide ballot. What we didn’t see coming was that House Republican Leader Kevin McCarthy (R-Bakersfield) would bankroll the signature-gathering effort as a way to boost turnout for vulnerable

Republican members of Congress seeking re-election that November. The measure, known as Proposition 6, did make it on the ballot, but it wasn’t enough to save the jobs of half of the 14 Republican members of Congress who were seeking re-election. The SB1 repeal was defeated at the ballot box, and is now funding thousands of pavement improvement projects across the state. We were hoping to be wrong about our prediction of no meaningful action on the federal transportation funding front, but Washington gridlock remained the status quo (and a pretty safe prediction, if we’re going to be honest). We correctly predicted another solid year of economic growth, however, and also correctly predicted that another major long-life asphalt pavement project would be rolled out by Caltrans, which it was, on Interstate 5 in Sacramento. In January of 2019 we predicted that Caltrans would roll out a new pavement smoothness specification, but that was hardly crystal ball magic. We had been working with department engineers on the issue for months, so we knew it was coming. We also predicted that major executive management changes would be ushered in with the arrival of a new governor, Gavin Newsom, which ultimately came to pass. We also correctly pegged the trend in global oil prices. With 2020 upon us, we were once again back with our fearless predictions (see sidebar). Some are hopeful, and others we feel confident will come to pass before December rolls around. At that time, we’ll be once again looking “Back to the Future.” CA Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association (CalAPA®).

California Asphalt Magazine • 2020 Forecast Issue


A look ahead: Our predictions for the Top 10 stories that will impact the asphalt industry in California in 2020

1. SB1 monitoring Turning transportation dollars into construction projects will be a top focus in 2020 as voters, taxpayers and transportation system users look for tangible evidence that they are getting a return on investment for the first increase in the state's gas tax since the 1990s. Senate Bill 1, the Road Repair & Accountability Act of 2017, has pumped more than $5 billion per year into state and local transportation budgets. When the governor announced last year that he wanted to "leverage" $5 billion a year in transportation dollars to help reduce a trend of increased fuel consumption and greenhouse gas emissions in California, transportation advocates cried foul. Although the governor's announcement has been blunted somewhat by subsequent clarifications issued by his transportation agency, there will be a lot of eyeballs following those dollars from the pump to the pavement in 2020, including hearings by the California Transportation Commission, reports by the state's new Inspector General for transportation, and retooled reporting by the California Department of Transportation.

2. AB5 unleashes a flurry of legal, legislative activity Assembly Bill 5, authored by Assemblywoman Lorena Gonzalez, D-San Diego, sought to bring some clarity to a landmark court ruling from 2018 on independent contractors, but with its many exemptions and ambiguities, it did just the opposite. Snared in AB5's web was a whole host of industries, from ride-hailing services like Uber and Lyft, to freelance writers, artists and others. Trucking conducted by independent contractors was the biggest impact to the asphalt pavement industry in California, and a lawsuit was filed by the California Trucking Association that held up part of the law while the case drags into 2020. The Legislature will attempt to fix some of SB5's most problematic provisions and more legal challenges and a possible ballot fight will dominate the debate over SB5 in 2020 and beyond. 3. Leadership changes continue apace at Caltrans The massive California Department of Transportation will continue to shed experienced executives and managers to retirement in 2020 even as it grapples with trying to efficiently deliver on an ambitious program made possible by SB1 tax dollars. By year's end there will be a nearly 100 percent turnover in executive management since SB1

California Asphalt Magazine • 2020 Forecast Issue

passed and the department will be scrambling to fill the experience void as it hires thousands of new employees. An unresolved question: Will all the new faces change the culture of Caltrans, or will Caltrans change them? 4. Oil prices generally hold steady Global oil prices have remained remarkably consistent in recent years, absent major conflicts in oil producing regions and steady growth of new technologies that have opened up vast new sources of oil at home and abroad, contributing to a global glut on oil and depressing prices. Absent a major conflagration in the Middle East (hello Iran) or another major oil-producing region, oil prices should remain fairly constant in 2020 and exert a similar influence on asphalt prices, an oil-based product. If oil prices do inch higher, it could create an incentive for additional investment in extraction technologies that don't pencil out under current prices. That will further enhance supply and tamp down prices. 5. Big federal infrastructure deal remains elusive The reality TV show that Is today's Washington will enter uncharted territory in 2020 with the nation's firstever impeached 17


president running for re-election, and opposition party Democrats reluctant to hand him any signature legislative victories, such as a long-promised $1 trillion infrastructure bill. Look for more partisan bickering, and scant significant legislative achievement, in 2020 as all eyes are on the November presidential election and its consequences for down-ballot candidates. 6. Work-force challenges persist In a way, the construction industry in California has never fully recovered from the Great Recession of 2008-09, which saw the industry shed workers at an unprecedented rate, and many of them vanished for good. Now the search for qualified and willing workers, both in the craft and professional ranks, will be a continuing grind for employers in 2020 and will crimp industry capacity as elected officials make grand pronouncements about addressing California's high cost, and lack of availability, of affordable housing that is sending Californians fleeing to other states. 7. The economy chugs along If California was a separate country, its economy, with a Gross Domestic Product of about $2.7 trillion, would be the world's fifth largest, having recently overtaken Great Britain. It has been a long climb for the state, which saw itself fall to as low as 10th on the list during the Great Recession. Since then the state has added more than 2 million jobs and grown its GDP by more than $700 billion. Home to 40 million residents, California will see another year of solid economic growth in 2020 as economic storm clouds, which to some always seem to hover in the distance, never move in to rain on the parade. 18

8. Recognition for the Joint Training & Certification Program piles up The Caltrans-industry Joint Training & Certification Program, two decades in the making, moves out of the start-up phase and into mainstream integration, and continues to earn statewide recognition for excellence. The program held 93 classes and trained 1,671 technicians through 2019, and attracted the notice of elected officials searching for examples of "accountability" as part of SB1, the "Road Repair & Accountability Act of 2017." By year's end, the program will win at least one statewide award for innovation and receive further positive reviews by elected officials. 9. Long-life asphalt pavement strategy goes mainstream Asphalt pavements that last 40 years or more with minimal maintenance will bear all the hallmarks of a mainstream pavement strategy in 2020. One of the highest-profile projects yet, the $370 million rehabilitation of Interstate 5 near downtown Sacramento, will kick into high gear in 2020 as it ultimately utilizes more than 600,000 tons of asphalt during the duration of the project. The project joins a growing list of other long-life projects that have been completed in recent years in California, including two on Interstate 5 in the North State, on Interstate 80 in Solano County between Sacramento and the San Francisco Bay Area, and on the 710 Freeway in Los Angeles County. By year's end, Caltrans will identify another project to use the strategy, building on the lessons learned from the previous projects.

10. California companies help launch asphalt association in Nevada A group of Nevada companies, including some familiar names that also do business in California and other nearby states, will formally organize in 2020 to form the Asphalt Pavement Association of Nevada, becoming the 40th such organization nationwide chartered to represent asphalt interests at the state level. The companies recognized the value of working collaboratively, sharing knowledge and best-practices, and speaking with a unified voice with state and local agencies and elected officials on behalf of the asphalt industry. The move will further enhance the stature of the State Asphalt Pavement Associations (SAPA) organization, and rekindle discussions in Arizona, the last state in the Southwestern United States without a state asphalt pavement association, to consider a similar move. Although this is not strictly a California story, there will be numerous synergy opportunities between California and Nevada, as there are with California and other states on the West Coast. Honorable Mention: Environmental regulation challenges in many different forms will continue to present themselves throughout the year in 2020, challenging the industry to stay on top of shifting requirements, technology and expectations in the area of airand water-quality protection, sustainability and understanding the impact of all industries (positively and negatively) on Greenhouse Gas emissions and climate change. CA

California Asphalt Magazine • 2020 Forecast Issue


Optimism dips in our 10th annual ‘Better-Worse’ survey; workforce challenges, project delivery among the top challenges By Russell W. Snyder, CAE

The 10th annual CalAPA® "Better or Worse" survey shows respondents remain bullish about 2020, although much less optimistic than a year ago, and many worry about workforce challenges, the private market and lack of work in rural areas. The brief, non-scientific poll of more than 2,500 "Asphalt Insider" newsletter subscribers, conducted late last year, found optimism somewhat lower than last year's all-time high but still very strong in the 10 years the survey has been conducted. The number of respondents who said next year would be better than 2019 stood at 47 percent, compared to 67 percent last year. That is in stark contrast to 2011, when the "better" number was just 20 percent. "SB1 money should be in full swing by 2020," said one industry respondent. "We have a much higher backlog," added another industry respondent. "We are a public agency," one respondent wrote. "Fuel tax money has stabilized and we are moving forward with projects." Indeed, the passage of SB1, the Road Repair and Accountability Act of 2017, appears to be contributing to the general optimism of the survey respondents. The bill, which raised the state's fuel taxes for the first time since 1994, is generating more than $5 billion per year for transportation, with most of the money devoted to roads. A November 2018 ballot measure, Proposition 6, to repeal the fuel taxes that were part of SB1, was 20

Total Number of Survey Responses

300

250

200

150

100

50 0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

"Better" (by percentage of respondents)

80 70 60 50 40 30 20 10 0 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2017

2018

2019

"Same" (percentage of respondents)

60

50

40

30

20

10 0 2010

2011

2012

2013

2014

2015

2016

California Asphalt Magazine • 2020 Forecast Issue


soundly rejected by voters. SB1 was mentioned by many survey respondents. "SB1 revenue streams will finally be hitting our roads," one industry representative said. "The need for road maintenance is dire. The public's frustration is palpable and they know the money is available via our gas taxes. Industry and taxpayer stakeholders are committed to bird-dogging road dollars from collection to paving. The paving future in California is bright as long as we do not tire in our duty to shepherd road revenue from the pump to the pavement." An agency representative added: "The future looks very bright because SB1 funding from the gas tax is flowing, so we will continue have the revenue needed to maintain our County's road system. SB1 funding makes a HUGE difference! 2019 was good, and 2020 will be even better." On the negative side, 13 percent of respondents said next year would be worse than 2019, an increase from the 6 percent who said that last year. The highest "worse" percentage in the history of the survey was 25 percent recorded in 2010, when the state was mired in a deep economic recession. About 36 percent of respondents said next year will be about the same as 2019. Much of the pessimism was related to lack of work, particularly in rural areas, and a decrease in private work. "There appears to be a real lack of projects coming to bid in our area," one rural paving contractor said, while another added: "It is the status quo. SB1 is doing us no good in the rural counties." Yet another industry representative from a rural area lamented, "Need SB1 funding to come in our direction."

"Worse" (by percentage of respondents)

30

25

20

15

10

5 0 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2017

2018

2019

"Don't Know / No Opinion" (percentage of respondents)

12

10

8

6

4

2 0 2010

2011

2012

2013

2014

2015

2016

WORSE

BETTER

STATE LOCAL PRODUCER

REFINER SUPPLIER PAVING CONTRACTOR

Of the overall respondents, about a quarter were public agency representatives, with the rest comprising asphalt producers, refiners, paving contractors and other companies that are part of the industry, plus a smattering of others.

California Asphalt Magazine • 2020 Forecast Issue

STATE LOCAL PRODUCER

REFINER SUPPLIER PAVING CONTRACTOR

For the fourth year in a row, the survey added an optional question, "What is the No. 1 challenge where you work?" That question elicited 82 written responses, with lack of being able to attract and retain qualified workers the top issue by far, followed by regulatory challenges. 21


"Attracting and retaining talented employees," one industry respondent said. "Finding experienced staff with a strong work ethic," added a local agency representative. The churn in the workforce, with many experienced personnel retiring, is creating conflicts between industry and agency personnel, the survey responses suggest. "Engineers and Inspectors that are green (new to the job) makes the work more challenging as the more experienced Engineers and Inspectors are retiring," said one industry respondent. Several other respondents cited AB5, a new law that took effect Jan. 1 and impacts independent trucking, as well as the overall daunting regulatory environment in California. The

new law is ensnared in legal challenges and a potential ballot measure fight. "Cost of complying with regulations," once industry person cited as a No. 1 challenge. The main survey question is purposefully vague: "For your company or organization, how do you think 2020 will compare to 2019?" However, most of the voluntary comments offered up by survey respondents to justify their opinion centered around how much work is expected in the coming year. The answer varied by company, agency and region, reflecting the size and diversity of California's massive economy and the economic micro-climates that are spread across the state. As in previous surveys, the weather largely depends upon where you are standing.

Some respondents commented that work was booming, while others were disappointed. Several respondents noted a drop-off in private work. "A slowdown in housing," said one. "Private work down," added another. A city respondent took note of a "drop in grading permits for private development." A total of 123 people took part in the voluntary on-line survey, which was conducted from Nov. 7 to Dec. 18. CA Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association (CalAPA®).

a Division of Butler-Justice, Inc.

Best Available Control Solutions for Blue Smoke, Odors & VOC’s in Asphalt Plants Patented and Proven as Best Available Control Technology. The most efficient and cost-effective emissions control solutions—now at over 100 hot mix plants nationwide.

Amazing New Technology. X-VOCS removes odors and VOC’s such as Hydrogen Sulfide (H2S) from the Hot Mix Asphalt process. Best when paired with our collectors.

Your Reliable Resource For Asphalt Plant Solutions

Butler-Justice, Inc. Industrial Equipment, Parts & Service Asphalt Plant Wear Parts, Dust Collectors, Burners, Electric Motors, Belt Scales

22

5594 E. La Palma Ave. Anaheim, CA 92807 (714) 696-7599 mikeb@butlerjustice.com www.bluesmokecontrol.com www.butlerjustice.com

California Asphalt Magazine • 2020 Forecast Issue


Visit us at Booth S5254

MEET THE AMMANN FAMILY OF PRODUCTS

NEW

ACP CONTIHRT

Ammann America Inc. 1125 SW 101st Road, Davie, FL 33324 Phone (954) 493-0010, Fax (954) 493-0020, info.aaa@ammann.com For additional product information and services please visit: www.ammann.com GMP-2626-00-EN | © Ammann Group

(800) 300-4240

SERVING: LOS ANGELES, ORANGE, VENTURA AND SAN BERNARDINO COUNTIES.

FIVE STRATEGICALLY POSITIONED PLANT LOCATIONS Sun Valley Plants 11462 Penrose St. Sun Valley, Ca 91352 Irwindale Plant 2600 Avenida Barbosa Irwindale, Ca 91706 South Gate Plant South Gate Recycling 5625 Southern Ave. South Gate, Ca 90280 Inglewood Plant 441 Railroad Place Inglewood, Ca 90301 Victorville Plant Victorville Recycling 15650 Air Expressway Victorville, Ca 92394

www.BlueDiamondAsphalt.com

California Asphalt Magazine • 2020 Forecast Issue

23


Asphalt pavement market outlook for 2020 and beyond By Jay Hansen

s the start of the 2020 construction season is suddenly upon us, many are wondering how the asphalt pavement market will perform this year. There are approximately 3,500 asphalt plants in operation in the United States. Each one of them represent a local market for asphalt pavement mix. By examining the macro drivers impacting the asphalt pavement industry, a general picture emerges that when local market drivers are applied can indicate how a local asphalt pavement market might perform. The first step is to recognize that there are three broad customer groups for asphalt pavements in the United States: state departments of transportation, other agencies, and commercial and residential customers. The first two sectors are responsible for publicly funded projects ranging from highways and runways to local streets and parks and use about two-thirds of total tonnage produced annually. Federal-aid Highway funding contributes just over half of the capital construction costs for public road projects with state and local funding contributing the rest. 2020 Highway Market Last December, Congress approved funding the Federal-aid Highway Program for the 2020 construction season at $46.4 billion from the Highway Trust Fund with an additional $2.2 24

Federal funds, on average, provide 51% of annual State DOT capital outlays for highway & Bridge Projects Over 69% of state highway & bridge capital outlays

50 to 69% of state highway & bridge capital outlays

28 to 49% of state highway & bridge capital outlays

NH

35% 92%* 54%* 68%*

VT

64%

70%

51%

72%

72%*

69%* 64%*

88%*

42%

55%*

41% 44%

39% 64% 50%

74%

40%*

41%

59% 70% * 46%*

53% 64%*

77%*

71%*

77%*

CT

RI

63%

95%*

DE

NJ

50%*

28%

76%

58%*

35%

MA

56%*

70%*

54%*

80%

47%

42%

62%

51%*

49%*

61%*

MD

DC

39%*

54%*

37% HI 82% * States that have issued GARVEE bonds before 2014.

Source: American Road & Transportation Builders Association

Federal-Aid Highway Funding For California FY2017 – FY 2019 (in millions) $3,390

$3,390

$3,616

$3,756

$185

$256

$3,430

$3,500

2017 2018 Highway Trust Fund

Since 2017, Federal support for California’s highway program has grown 17 percent under Appropriation bills. ($592,000,000)

2019 General Fund

billion in spending on roads and bridges from the General Fund. Over the past three years, Congress has added $12 billion in highway funding that states can match for use on highway projects. In lieu of a big infrastructure bill promised by President Trump, Congress has provided these additional

funds in response to the Trump infrastructure initiative. At this writing, the Federal Highway Administration has not announced California’s specific allocation for FY2020, but since 2017 federal support for California’s highway program increased by $592 million, or 17 percent, thru 2019. In addition,

California Asphalt Magazine • 2020 Forecast Issue


the U.S. Department of Transportation has awarded an additional $132 million in BUILD and INFRA Grants for six specific highway projects since 2017 in the state. These grants are on top of the formula grants allocated to California annually. At the state and local level, many states, including California, have approved measures to grow investments in highways. In 2019, 30 states approved 46 bills generating $7.7 billion in one-time or recurring revenues for transportation investment. In addition, voters in 19 states approved state and local measures raising $4.76 billion for streets and highways. For asphalt producers fortunate enough to be in one of the areas that approved increased investment for roads, it stands to reason the local asphalt pavement market should see an increase in 2020. 2020 Airport Market About 85 percent of the nation’s runways are asphalt and any increase in investment for airfields will benefit asphalt mixture producers. Like the Federal-aid Highway Program, Congress has been very generous over the past three years in boosting investments for airfield pavements. For years Congress funded the Airport Improvement Program (AIP) at $3.35 billion annually. Since 2018, however, Congress has added an additional $1.9 billion to the program. Just over half the funding from the AIP Program funds runways, taxiways, and aprons — all of which can be constructed with asphalt. Passenger facility charges (PFC’s) contribute another $3 billion to the airfield pavement market. Like the highway market, the asphalt pavement industry should see a boost in the airfield pavement

Asphalt Pavement Market

Federal funds, on average, provide 51% of annual State DOT capital outlays for highway & Bridge Projects

PubliclyFunded Highways (Federal)

Commercial Residential

Publicly-Funded Highways (State)

market as a result of this increased funding. Unlike the state allocations for highway funding, AIP funds are applied on a project-by-project basis, which can be tracked on https://www.faa.gov/airports/aip/ grantapportion_data/.

suggests construction spending in this category is likely to wane. The commercial and residential markets vary more than other sectors from area to area, so their impact on demand for asphalt pavement mixture will similarly vary from market to market.

Commercial and Residential Markets Plenty of information is available on the internet and from experts to assess the health of commercial and residential markets. In general, the consensus is that the job market will remain strong and interest rates low for 2020. On the residential side, the U.S. is not producing enough housing stock to meet demand. Labor shortages and the tendency for existing homeowners to remain in one home longer are pinch points constraining housing supply, which contributes to making the housing market unfordable for many. The forecast for housing activity in 2020 is about 1.3 million starts, twice as high as during the Great Recession but still below the historical average of 1.4 million to 1.5 million starts. On the other hand, overbuilding in non-residential segments, including office and lodging,

Asphalt Pavement Market in 2020 So what does all this mean? In general, the market for asphalt pavement mixture entering the 2020 construction season remains robust. Private spending on residential construction should grow, albeit at a slower pace. Commercial construction spending may weaken a little. Public spending on highway and street construction is where growth in the asphalt pavement market in 2020 will be greatest. There was about a 2.6 percent growth in asphalt pavement tons from 2018 to 2019, and 2020 should see a similar level of growth.

California Asphalt Magazine • 2020 Forecast Issue

Asphalt Pavement Market Beyond 2020 After 2020 the asphalt pavement market will depend on several factors, including the outcome of the presidential elections, the health of the U.S. 25


economy, and interest rates. The biggest factor, however, will be the need for Congress to reauthorize the FAST Act, which expires Sept. 30, 2020. Having a good, five-year transportation reauthorization bill provides the certainty state transportation departments need to budget and bid out multi-year highway projects. Five-year highway bills also allow for the construction industry to manage capital investments and planning for their businesses. If a five-year highway bill does not materialize, Congress will resort to short-term extensions of the Federal-aid Highway program, which creates uncertainty for state transportation departments and contractors alike. From the perspective of

many lawmakers, the main stumbling block Congress must overcome to pass a new transportation reauthorization bill is determining how to raise the revenue needed to pay for the bill. While contractors will be hard at work in 2020, it should not be taken for granted that Congress will pass legislation this year to increase a transportationrelated tax to pay for a new bill. It is important to engage with lawmakers and to encourage others to do the same. There are reasons to be optimistic that Congress will act. The American Transportation Infrastructure Act currently pending in the Senate would provide, on average, $610 million annual increase for projects in California, the vast majority of which will require

asphalt pavements — if Congress can figure out how to pay for it. In closing, asphalt pavement contractors should have a good 2020 construction season. At the same time, the asphalt pavement industry must get active and persuade their members of Congress to do their job by enacting a multi-year surface transportation reauthorization bill by next October. Only then will there be clarity in the asphalt pavement marketplace in 2021 and beyond. CA Jay Hansen serves as the executive vice president – advocacy for the National Asphalt Pavement Association

CA Lic. #569352

%

ne

d

1

00

Em p

w loyee O

SERVICES OFFERED Cold Milling Cold In-Place Recycling (CIR) Cold Central Plant Recycling (CCPR) Diamond Grinding

Pavement Recycling Systems

26

Soil Stabilization Full Depth Reclamation Pavement Preservation

Winterization & Dry-Ups Value Engineering Contractor Support

www.pavementrecycling.com California Asphalt Magazine • 2020 Forecast Issue


SOUTHERN CALIFORNIA’S PREMIER DOOSAN DEALER

WORK SMARTER – NOT HARDER Call Scott Equipment Today (800) 316-0327

www.scottequip.com Serving California For 50 Years!

California Asphalt Magazine • 2020 Forecast Issue

SALES • RENTALS • PARTS • SERVICE Fontana / 909-822-2200

Santa Fe Springs / 562-777-0775

14635 Valley Blvd., Fontana, CA 92335 10918 Shoemaker Ave., Santa Fe Springs, CA 90670

27


ASPHALT SCALES TO YOUR PROJECT’S NEEDS

No matter how high the traffic volume, there’s an asphalt design that can handle it. Through pavement design and material selection, asphalt pavements can be built to carry any load. Plus specialty mixes can be engineered to meet specific needs and climate conditions, all while remaining cost-effective to build and easy to maintain.

WHEN IT COMES TO FLEXIBILITY ASPHALT PERFORMS

L E A R N M O R E AT W W W. D R I V E A S P H A LT. O R G


2020 ANNUAL CALIFORNIA ASPHALT PAVEMENT CONFERENCE Disney’s Grand Californian Hotel ® & Spa

KEYNOTE SPEAKER

• FEATURED SPEAKERS

DAVID S. KIM,

• EXPERT PANEL DISCUSSION

SECRETARY OF THE

• BREAKOUT SESSIONS

CALIFORNIA STATE

• NEW RESEARCH & TECHNOLOGY

TRANSPORTATION

• TRADE SHOW FLOOR

AGENCY

• NETWORKING

Date:

April 15-17, 2020

Location: Disney’s Grand Californian Hotel® & Spa

1600 S. Disneyland Drive, Anaheim, CA 92802

Contact Sophie You at (916) 791-5044 or register online at CalAPA.net


CONFERENCE SPONSOR & EXHIBITOR OPPORTUNITIES $10,000 SUSTAINING SPONSOR • Half-page Advertisements in 6 issues of California Asphalt Magazine • 2 Extra Reception Guest Tickets • General Session Sponsor • 2 Extra Drink Tickets • Plus all Champion Sponsor Perks

$5,000 PATRON SPONSOR • Half-page Advertisement in 1 issue of California Asphalt Magazine • 2 Extra Reception Guest Tickets • General Session Sponsor • 2 Extra Drink Tickets • Plus all Champion Sponsor Perks

$3,500 VISIONARY SPONSOR (1)

$3,000 LEGACY SPONSOR • Reception Signage • Break-out Session Sponsor • Plus all Champion Sponsor Perks

$2,000 SHOWCASE SPONSOR • Exhibit Table • Plus all Champion Sponsor Perks

$1,500 CHAMPION • 2 Conference Tickets • 2 Reception Guest Tickets • 1 Page Conference Insert and Premier recognition throughout the year • Company logo will be featured on major event marketing materials

• Lanyard Sponsor • Plus all Champion Sponsorship Perks

Exhibit Space Information •

Tabletop displays or retractable banners are recommended but are not required. The dimension of each exhibit space is approximately 6 feet deep by 9 feet wide. Main conference room exhibitor space availability will be on a first-come, first-served basis upon receipt of payment. Exhibitor price subject to change for special requests or accommodation. Please contact Sophie You of CalAPA® at 916-791-5044 or syou@calapa.net for details.

You are responsible for your own shipping costs for packages being shipped to the Disney's Grand Californian Hotel® & Spa. Materials for the conference should arrive at the hotel no earlier than April 12th. Shipments received prior to April 12th will be returned. Please follow these shipping label instructions: Guest Name, CalAPA® Conference - April 15-17, 2020, Disney's Grand Californian Hotel® & Spa, 1600 S. Disneyland Drive, Anaheim, CA 92802.

Handling fees: $40.00 per hundred weight ($7.00 minimum per item) for items not to exceed 60 lbs. or 130 inches total dimensions (girth & height). Items requiring special handling will be charged accordingly.

Exhibitor setup time: Wednesday, April 15th from 6:00 p.m. to 10:00 p.m. or Thursday April 16th at 6:00 a.m. to 7:30 a.m. Alternate setup times may be available on a case-by-case basis. Please contact Sophie You at (916) 791-5044 for specific requests. All exhibitors must be set up by 8:00 a.m. Thursday, April 16th.

Please exercise extreme caution to avoid damage to the Disney's Grand Californian Hotel® & Spa property. The exhibitor agrees to pay the cost of repairing any damage resulting from the exhibitor’s equipment, displays or activities.

Register online at www.calapa.net or complete this form and return with check made payable to “California Asphalt Pavement Association,” or with your credit card information. Mail to CalAPA®: P.O. Box 981300, West Sacramento, CA 95798. Phone (916) 791-5044 or e-mail Sophie You at syou@calapa.net.


CONFERENCE PRICING & REGISTRATION I would like to sponsor/exhibit/register (please check): Sustaining Sponsor - $10,000

Legacy Sponsor - $3,000

Non-Member is - $599

Patron Sponsor - $5,000

Showcase (Exhibitor) - $2,000

CalAPA® Member - $399

Visionary Sponsor - $3,500

Champion Sponsor - $1,500

(after March 15 - $499)

Agency/Academia ONLY - $299 (after March 15 - $499)

Optional evening Reception (April 15th) - $99 (Conference registration includes breakfast and lunch for conference days April 16 & 17, access to the exhibit hall, general and breakout sessions)

LODGING INFORMATION Disney’s Grand Californian Hotel® & Spa 1600 S. Disneyland Drive, Anaheim, CA 92802 April 15-17, 2020 There are a limited number of rooms reserved at the Disney’s Grand Californian Hotel® & Spa at an amazing discounted rate of $314 (taxes not included) per night for those attending the asphalt pavement conference. To secure a room please contact the Disneyland Resort by booking online at www.mydisneygroup.com/gccd20a or by calling (714) 520-5005 for CalAPA® Conference attendees. Guests who call the reservation line must identify themselves as part of the “California Asphalt Pavement Association” function to be eligible for the conference rate. Mention the group code “CalAPA®” and reserve your room early! The special conference rate expires on March 15, 2020 or when number of rooms available at this special rate are gone, whichever comes first. Discounted special group theme park tickets available to purchase online via the same URL noted above.

Registrant attendee info: Register online at www.calapa.net or complete the form below, scan and email to: syou@calapa.net

Payment Information for Sponsor/Exhibitor and Registration: Check in the amount of $ made payable to: California Asphalt Pavement Association (CalAPA®) Amex

Master

Visa

Type of Sponsor:

Company Name:

Contact Name:

Ph#:

Email:

Card#:

Exp:

CVV#:

Mail to CalAPA®: P.O. Box 981300, West Sacramento, CA 95798. Phone (916) 791-5044 or e-mail Sophie You at syou@calapa.net.


Lots of amazing shots at annual CalAPA golf tournament in Temecula; plenty of golf, too ®

It featured a challenging new course, and the debut of a gourmet food and fine wine reception. But this year's annual CalAPA® asphalt industry golf tournament, sponsored by the Southern California Contractors' Committee, carried on a tradition of fun that has made it one of the most popular events in the industry. The golf tournament was held Sept. 12 at the Temecula Creek Inn in Temecula, featuring challenging holes and manicured greens amid a breathtaking desert setting. Fabulous weather and a boisterous awards luncheon made for a great day with colleagues and co-workers. Proceeds from the

event benefit CalAPA® scholarship recipients. New this year was a special gourmet food and fine wine reception held the night before at the Pechanga Resort and Casino in Temecula. Attendees got to sample local wines served by a resident wine expert, and sample gourmet food, including an epic, made-to order gourmet "mac & cheese" skillet station featuring lobster and other delicious ingredients. It was popular all night. A special thanks goes out to the golf tournament sponsors, which made the event possible: "Pebble Beach Sponsors" Ergon Asphalt & Emulsions, Inc. and Valero Marketing

Valero Marketing & Supply group at the CalAPA® Wine Mixer on Sept. 11 at Pechanga Resort in Temecula.

Pascal & Patsy Mascarenhas (left), Lou Moreno, Carlos Hernandez, Monica Moreno and Berlene Hernandez.

Richard Champion, Chris Herne, CEI Enterprises, Susana Mitchell, Taylor Environmental Services and Jason Mitchell, Security Paving.

Rudiney Melo, Ammann (left), Bill Knopf, CalAPA®, Jeff Brown and Paul Schratz, Roadtec.

Steve Marvin, LaBelle Marvin (left), Brandon Milar, Technical Director, CalAPA® and Brian Hoover, CMS.

Lou Moreno, Diversified Asphalt Products (left), Robert Jarvis, Century Paving and Russell Snyder, Executive Director, CalAPA®.

32

& Supply; "Pinehurst Sponsors" California Commercial Asphalt, Diversified Asphalt Products, Holliday Rock, Pacific GeoSource, Patriot Risk & Insurance Services, Pavement Recycling Systems Inc., Quinn Company, The R.J. Noble Co., United Paving Co., World Oil Co.; "Sawgrass Sponsors" G3 Quality and Taylor Environmental Services. The beverage cart sponsors were Astec & CEI, Construction Marketing Services, and Road Science, a division of ArrMaz. The "Hole-inOne" sponsors were Coastline Equipment and Nixon-Egli Equipment. The contest sponsor was Pacific GeoSource. CA

California Asphalt Magazine • 2020 Forecast Issue


Eric Hopkins, Papich Construction (left), Susana Mitchell, Taylor Environmental Pavement Recycling Systems’ foursome Services, Steve Marvin, LaBelle Marvin and included left to right; Marco Estrada, Angelo Rudiney Melo, Ammann. Cruz, James Emerson and Steve Gomez.

Jeff Prescott, Premier Paving (left), Mark Molina, NPG, Wayne Seagraves, Premier Paving and Doug Bowlen, Holliday Rock.

Chris Herne, CEI (left), Richard Champion, CEI, Scott Taylor, Taylor Environmental Services and Eddie Van Zyl, Astec.

Brandon Milar. CalAPA® (left), Chris Gerber, United Paving’s group included Rick G3 Quality, Keith Terrill and Brian Platt, Espinosa (left), Tracie Moran and Tim G3 Quality. McLean.

California Commercial Asphalt’s foursome: Ryan Merritt (left), Zach Roberts, Jason Tait and Nick Conklin. Aaron Terry, Terra Pave (left bottom), Chris Barry, Beach Paving, (top left), Steve Cota, Patriot Risk and Insurance Services, (bottom right) and Jeff Parsells (top right).

Robert Jarvis, Century Paving (left), Chad Martindale and Lou Moreno, Diversified Asphalt Products.

Pacific GeoSource foursome: Kyle Morgheim (left), Alex Kotrotsios, John Dvorak and Brian Beckner.

Vulcan Materials’ foursome: Pascal Mascarenhas (left), James Bleeker, Rene Isenhart and Alex Perez.

Joe Schafer, Quinn Company, Travis McClure, Caterpillar, Mike Hinson, Quinn Company and Derik Ritarita, Vance Corp.

Sully-Miller’s foursome; Shon Esparza (left), Talin Espinoza (left), Twining, Tim Reed, Scott McClure, John C. Rogers and Bryan Vulcan, Rob Piceno, Vulcan and Andrew Van Holland. Suarez, Twining.

California Asphalt Magazine • 2020 Forecast Issue

Sully-Miller Contracting’s foursome: Jesse Delgado, Robert Contreras and Eddie Vargas.

33


Mike Butler, ButlerJustice (left), Brett Long, Matich Corp., Barry Coley, Escondido Sand & Gravel and Dan Copp, Retired – Dan Copp Crushing.

Kevin Scott, Scott Equipment (left), Bryce Borden, Borden Excavating, Dennie Reed and Don Luna, Vulcan Materials.

JR Menvielle, Milan Lubanko and Todd Fields, Butler-Justice.

R.J. Noble Company foursome: Robert Gillespie (left), Terry McGill, Craig Didano and Braden Porter.

Matt Pound (left), Jonathan Luke, Escondido Materials and Taylor Schmidt, Vulcan Materials.

Valero Marketing & Supply’s foursome: Mike Lundy, Oscar Miranda, Phil Richards and Aaron Washington.

Tyler Skender, American Asphalt (left), JD Kline, All American Asphalt and Tom Hicks, Ergon Asphalt & Emulsions.

Scott Litteral, Larry Ryan, Dave Wetmore and Tom Temple.

The golf tournament started out right with a delicious breakfast featuring egg burritos.

Members and golfers enjoying the breakfast.

CalAPA® Golf Tournament Raffle Prize table at Temecula Creek Inn.

Brandon Milar, CalAPA® Technical Director was the emcee at the golf tournament awards lunch.

First place winners; Tyler Skender (left), Tom Hicks and JD Kline at CalAPA®’s annual golf tournament.

Susana Mitchell, Taylor Environmental Services won ladies longest drive and a cash prize.

The luckiest guy on earth Pascal Mascarenhas won the grand prize Xbox console.

34

California Asphalt Magazine • 2020 Forecast Issue


CALENDAR UPDATE 2020 ANNUAL CONFERENCE Date: April 15-17, 2020 Disney’s Grand California Hotel® & Spa 1600 Disneyland Drive Anaheim

‘DAY AT THE RACES’ Date: July 18, 2020 Del Mar Thoroughbred Club 2260 Jimmy Durante Blvd. Del Mar

Meeting dates are subject to change. Watch the weekly Asphalt Insider newsletter for meeting updates or call CalAPA® at (916) 791-5044 to confirm meeting date and location.

California Asphalt Magazine • 2020 Forecast Issue

35


INDUSTRY NEWS

Pascal Mascarenahas and Dennie Reed honored by family, friends and peers at recent Vulcan Materials Company retirement event in Irwindale Pascal Mascarenahas and Dennie Reed had both worked for Vulcan Materials Company for nearly 25 years. Dennie served as the senior procurement buyer, purchasing oil and other raw materials for both the asphalt and concrete divisions. Pascal was the asphalt quality manager for Vulcan and worked closely with Caltrans and other agencies to ensure that all material specifications and quality expectations were continually met. Tim Reed is the quality control manager for Vulcan Materials and has been with the company for 18 years. He is also Dennie Reed’s son and a close friend and colleague to Pascal. “Dennie led by example and always treated everyone with tremendous dignity and respect,” says Reed. “The consistent message from his peers at the retirement party was that he

handled everything fairly, and always wanted to do what was right. Not only for the company but for each individual and the industry in general.” Reed says that Pascal was also well-known for treating his co-workers and industry professionals with the highest levels of professionalism and respect. “Pascal spent much of his time traveling from Southern California to Sacramento and carried a heavy load with the responsibility of evaluating and approving mix designs for Vulcan and working hand in hand with Caltrans,” says Reed. “Pascal had a way of analyzing an issue or challenge and somehow was able to figure out a way to get everyone on the same page. He was always passionate about his job duties while keeping a level head with a consistent goal of continuing the move the asphalt industry forward.”

The two guests of honor Dennie Reed (left) and Pascal Mascarenhas.

Reed family from left Tim, Selma, Dennie, Jeremy and Mark.

Lenny Novak, Vulcan Materials procurement manager (left) with Dennie Reed retiring senior procurement buyer.

Pascal Mascarenhas (center) received a plaque from Tim Reed (left) and Jeff Pollard Pascal Mascarenhas retiring Vulcan (right) stating that the lab will be now be Materials asphalt quality manager with named after him for his service to the his wife Patsy Mascarenhas. industry.

36

Vulcan Materials Company held a special celebration and retirement event for Dennie Reed and Pascal Mascarenahas Dec. 19 at the Irwindale Chamber of Commerce. 60 to 70 guests were on hand to celebrate the hard work and commitment that both men exhibited for nearly 25 years. Family, friends, and peers joined together to recognize both Pascal and Dennie while sharing their stories and memories of both men. “From what I understand, Pascal loves to travel, and he is busy doing more of that right now with his wonderful wife, Patsy,” continues Reed. “My father, Dennie, is spending much of his time with his first grandchild, my daughter, Jacey. He cherishes that time with her but leaves enough in his schedule to pursue one of his other passions, playing golf.” CA

Dennie Reed (center) surrounded by the Vulcan Materials procurement team.

California Asphalt Magazine • 2020 Forecast Issue


NEW MEMBERS OF CalAPA® MINDS CORP. 2430 North Decatur Blvd, Ste. 120 Las Vegas, NV 89108 mindsusa.com

Arnaud Ourcival Product Manager P: 833.646.3787 aourcival@mindsusa.com

SURFACE TECH LLC 888 Prospect St., Ste. 200 La Jolla, Ca 92037 surface-tech.com

Steve Santa Cruz President P: 619.880.0265 steve@surface-tech.com

KRATON POLYMERS, U.S. LLC 20223 Hoya Lane Garden Ridge, TX 78266 kraton.com

Gary Fitts Market Development Manager P: 210.381.6922 garyfitts@kraton.com

California Asphalt Magazine • 2020 Forecast Issue

37


Ammann America, Inc............................23

Matich Corporation.................................38

Blue Roads Solutions.............................39

Nixon-Egli Equipment Co....... Back Cover

Butler-Justice.........................................22

Pavement Recycling Systems................26

CalAPA®....................................................28

Peterson CAT.............................................2

Clairemont Equipment............................27

Quinn Co....................................................2

Coastline Equipment................................5

Roadtec................................................... 11

Diversified Asphalt Products.................15

Scott Equipment.....................................27

E.D. Etnyre & Co......................................37

Sitech.......................................................19

Hawthorne CAT.........................................2

Sully-Miller Contracting Co....................23

Herrmann Equipment, Inc........................7

TransTech Systems, Inc..........................35

Holt of California.......................................2

Volvo Construction Equipment & Svcs....3

SINCE 1918

1-800-404-4975 ASPHALT SALES CONTACTS: Toll Free order Desk: 800-404-4975 Phone: 909-382-7400

SERVING RIVERSIDE AND SAN BERNARDINO COUNTIES WITH QUALITY ASPHALT MATERIALS AND SERVICE.

CABAZON ASPHALT PLANT: 13984 Apache Trail Cabazon, CA 92230 Phone: 951-849-8280 REDLANDS ASPHALT PLANT: 8397 Alabama St. Redlands, CA 92373 Phone: 909-792-3650 RIALTO ASPHALT PLANT: 3221 N. Riverside Ave. Rialto, CA 92376 Phone: 909-356-0537 www.MatichCorp.com asphaltsalesgroup@matichcorp.com 38

California Asphalt Magazine • 2020 Forecast Issue


LNG FOR ASPHALT PLANTS RESPONSIBLE, RELIABLE FUEL

Blue Roads helps asphalt producers exceed industry standards operationally, economically and environmentally by providing turn-key solutions for the cleanest burning fuel, liquefied natural gas. Their services include LNG procurement and supply, on-site infrastructure design and implementation, full-service logistics and distribution, and system control management through remote monitoring.

PROVEN OPERATING BENEFITS Maximize combustion efficiency and production with the preferred burner fuel

Significantly reduce emissions with maximum combustion Ensure uninterrupted fuel supply and extended equipment life Allows plant personnel to focus on production rather than fuel management Mobile and stationary solutions are available to achieve operational, safety and environmental benefits through utilizing LNG as the preferred fuel for industrial power generation and burner fuel.

CALL US TODAY Blue Roads Solutions, LLC 2523 Bomar Ave, Dallas, TX 75235 Walker Steward, Co-Founder 214.500.6876 | walker@blueroadssolutions.com WWW.BLUEROADSSOLUTIONS.COM


California’s Largest General Line Construction and Municipal Equipment Dealer. So. California: 2044 S. Vineyard Ave., Ontario, CA 91761 • (909) 930-1822 No. California: 800 E. Grant Line Rd., Tracy, CA 95304 • (209) 830-8600 www.nixon-egli.com

Profile for CMS

California Asphalt Magazine - 2020 Forecast Issue  

Check out the annual forecast issue of California Asphalt Magazine.

California Asphalt Magazine - 2020 Forecast Issue  

Check out the annual forecast issue of California Asphalt Magazine.