Q&A: Steve Holloway

By Buck Wargo

Friday, Aug. 13, 2010 | 3 a.m.

Steve Holloway has a front-row seat on what the economic downturn has done to the construction industry in Las Vegas.

The executive director of the Associated General Contractors of Las Vegas, Holloway has seen his 600-member organization lose more than 100 members in the past two years and is bracing for another 100 to 200 members to drop off the roll after having gone out of business.

The 67-year-old Holloway, an attorney and former mining industry executive until he took over the Southern Nevada chapter of the AGC 16 years ago, oversees an office with eight full-time workers.

The trade organization is one of more than 100 chapters nationwide with 33,000 member companies. The national headquarters lobbies Congress and the White House.

The Southern Nevada chapter lobbies local governments on issues like construction-related fees. It also works with regulatory agencies and lobbies the Nevada Legislature on behalf of its membership.

The AGC negotiates labor contracts with unions and offers safety services, health insurance and workers’ compensation insurance to members.

Its membership includes developers, general contractors, subcontractors, construction suppliers and affiliates such as banks and insurance companies. Annual dues start at $750 and surpass $1,400 for some general contractors. It also receives revenue from labor contracts.

IBLV: What is on the agenda for the next state legislative session?

Holloway: We have a Building Jobs Coalition that we formed to try to get funding for capital improvement projects to put people back to work. About half the people drawing unemployment right now are construction workers. The question is whether you would rather pay unemployment benefits or use that money to get those people back to work and stabilize the tax base?

How can you do that with the state dealing with deficits?

During the special session, we were largely responsible for Senate Bill 5. It did a couple of things. No. 1, it removed the sunset on the sales tax for the Regional Transportation Commission down here and will provide over $1 billion in new road and highway construction here in Southern Nevada. That will put back to work, depending on whose numbers you are using, anywhere from 14,000 to 28,000 people to help stabilize the economy. For every $1 billion in improvements in public works, you have a return of $3.4 billion into the economy because of the multiplier. Not all of those 28,000 are construction workers. It includes people whose jobs are dependent upon construction.

What other issues you are pressing?

We are part of a coalition that will be working on tort reform, namely Chapter 40, which is the construction-defect chapter. It is not working. I can give you an example. The most recent case to go to court (involving D.R. Horton) without naming names had 196 town houses in a lawsuit for some alleged construction defects. They alleged the same 150 construction defects they always allege. Only 39 of the units were awarded (damages) on just one construction defect. They were awarded a grand total of $66,300. That was about $1,700 per unit. The other units still had this on their record and had to put it on their title. As a result, neither the FHA (Federal Housing Administration) or VA (Veterans Affairs) will loan to a buyer of that unit so the only way you are going to get out of it is through foreclosure.

Problem No. 2 is the attorney who went out and solicited this lawsuit and used all these experts has been awarded more than $4 million as compared to $63,000 the homeowners got along with a clouded title. We are trying to fix that. We have been trying to fix that for years unsuccessfully.

What would it take to fix it?

We need to change the law so the attorney’s fees aren’t guaranteed without merit to the case. So the judge has the discretion to make an award or not make an award.

The second thing we need to do is tighten up the definition of what is a construction defect because they will allege the nail patterns in a wallboard — that there are some nails in there a quarter inch off what the code calls for. It doesn’t affect the structural integrity of this building at all, but they still allege it.

Aren’t any of the defect claims valid?

Yes, but not to the extent we are talking about here.

How concerned are you about the state budget deficit and its impact on your industry?

We are very concerned with what tax proposal will come out of this next session, and we are involved with other groups and the legislative leadership. We feel very strongly, like most business groups, that there needs to be some drastic and dramatic cuts. We have a $2 billion deficit and at least $1 billion of that needs to be made up in the form of cuts to government programs and spending.

Does that include cutting construction as well?

No. What they have done is taken money from construction and plugged those holes. As a result, some very high-paid and often overpaid workers retain their jobs while we lay off half of the construction industry.

Are you calling for more taxation to deal with the deficit and increase construction projects?

They need to address the government payrolls and benefits before we even talk about taxes. We have people taking 20, 30 and 40 percent cuts in pay in the private sector. We have laid off 140,000 people and of all the people who have been laid off, less than 1 percent have been government workers. We spend our time on this fiscal crisis for government when we have an economic crisis here that outweighs it.

But is there a need to spend tax dollars on education and ways to help diversify the economy?

Before you can diversify the economy, you have to recognize the state has been trying for 30 years to diversify. They have been largely unsuccessful because they are competing with every other state in the nation. You are not going to diversify the economy until you stabilize it and your tax base. You have to have a business-friendly tax and regulatory climate before business is going to move here. You have to have infrastructure. We are 10 to 20 years behind in our infrastructure.

When we talk about money for capital improvements, I am not talking about money to simply put people back to work. I am talking about addressing a need. We have 395 shovel-ready projects in Clark County that need to be built that aren’t being built. I am talking about roads and highways and schools that need to be upgraded. We are way behind and business is not going to move here from one congested area to another. They are not going to move here unless they have a commitment that they are going to have water. And you have to do something about the schools. We have one of the worst school systems in the country.

How do you stabilize the economy?

We have had a growth economy for the last 30 years and that’s what has gone bust. You have to reinvigorate that economy. When over half of your people drawing unemployment are construction workers, you need to put them back to work. We are going to use tax money to pay for infrastructure rather than unemployment benefits. That is how we have come out of every depression we have had in this country.

What is your membership experiencing at this time?

We have had 20 percent or better membership close their doors, which is consistent with what’s happening out there overall in the last two years. We are talking about some developers, a number of general contractors, and a large number of subcontractors and then affiliates, banks, insurance companies and law firms, accounting firms, engineers and architects.

What happened to cause this?

The financial situation worldwide is the biggest contributor. Banks are not investing and they are not investing in construction here. The other part is we overbuilt on the private-sector side in Southern Nevada. We are looking at another three to four years before the unoccupied warehouses in Clark County are occupied and the unoccupied offices are occupied and the unoccupied strip malls are occupied. The third thing is the housing market.

How many more members will you lose?

I expect another couple of hundred before this is over. I would expect us to go from 600 to 500 and possibly 400 members by the end of 2011.

How are contractors hanging on now?

Federal jobs and public works jobs and a lot of tenant improvements. But every day one or two companies in the construction industry in Southern Nevada goes out of business. Nevada’s economy has been based on growth for 30 years. Construction was the second largest employer in the state with about 12.7 percent. We are down to 6.3 percent and going down further. We will probably get down to the national average of 5.7 percent, and if we don’t start to stabilize, we will fall below that.

What impact has the federal stimulus had?

The stimulus money in this state has created about 4,000 jobs contrary to all the claims. About 3,800 of those jobs aren’t new jobs but keeping government employees employed. The big bulk of the stimulus money has gone to unemployment benefits or Medicaid. We have created only a little more than 100 jobs in the construction industry. So far, we have only collected $28 million in highway construction stimulus money in this state. It is deplorable.

How many jobs have been lost and what has happened to these people?

Depending on who is counting, anywhere from 63,000 to 81,000 construction jobs. Anywhere from 10 to 15 percent have moved out of state.

Have we hit bottom yet?

Nope.

When do you expect the economy to rebound enough to help your membership?

We might see some signs of recovery toward the end of 2011 for our industry and probably won’t see any meaningful recovery until 2012.

What will your industry look like in 2015?

It is going to be significantly different from it is now. It is not going to be as big or represent as significant a part of the economy as it did two years ago.

Will it ever go back to what it was?

No. I don’t see Las Vegas at least in our lifetimes seeing another spurt like it did over the last 15 years. It may come back and come close to that, but none of the people I talk to see that recurring to that extent.

When will be the next project be built on the Strip?

We are hoping the Fontainebleau gets started back up and gets finished. Other than that, we don’t foresee any big projects on the Strip for several years.

How do projects like Fontainebleau that went into bankruptcy affect your industry?

It affected it two ways. All of those contractors and subcontractors on that project could be put out of business because of it. Because of the bankruptcy, their liens are wiped out. Secondly, we have a lot of people out of work now — 2,000 to 3,000 people.

What are you trying to do to protect contractors because of that?

We are preparing a bill that will require the owners to put (money) in escrow as it’s earned so it is held in trust for the contractors so if they do declare bankruptcy, the court could not get at that money.

Did you get involved in the dispute between CityCenter and Perini and the subcontractors not getting paid?

We did not get involved in that politically. We have a lot of our members involved in that and will be hurt by that if it’s not paid.

What is your take on this?

This is typical. Sheldon Adelson did the same thing on the Venetian. That money is still owed to those contractors. Every district court has awarded the contractors the money (but it drags on in appeal). He withheld $300 million. That bankrupted 32 contractors. A few of them have settled for 30 cents on the dollar. Just off the interest on that $300 million. Adelson will have paid all of his attorney’s fees and costs and probably made $150 million off the deal.

Do you think you will be successful?

It is definitely fair so we will see. We are not talking about money that the contractor hasn’t earned.

We see a lot these days of contractors fighting over public works projects, claiming they should get the bid over another firm. What are your thoughts on that?

The economy is terrible. We are in the middle of a depression as far as the construction industry goes. It is very, very competitive out there and those guys are fighting for those jobs to stay alive. That’s what it’s all about. If there is any indication that something is awry with that low bid, then you are going to get a protest.

How does your group differ from the Nevada Contractors Association?

First of all, we are much larger. We have about 600 members and they have about 100 members. Secondly, they represent only union companies. We represent both union and nonunion. They are actually a spinoff from the AGC that occurred in 1995.

Is there any advantage to being a union company?

The advantage is that you are able to get skilled workers much easier. The other reason is it would eliminate any union strife on your jobs.