Tuesday, January 29, 2013

Disaster Inc: Some Companies Win Big Post-Sandy

A store in the Rockaways rebuilding after Hurricane Sandy.

By Stephen Nessen / Robert Lewis : Reporter, WNYC

New Yorkers weren’t the only ones monitoring Sandy in the week before Halloween. A Georgia contractor was tracking the storm closely as it made its way north toward Lower Manhattan where his potential clients’ commercial buildings sat doomed to flood.

By the time Sandy was ready to hit the area on Oct. 29, Peter Hajjar and several of his employees at Reliable Restoration were parked outside Philadelphia waiting to move.

As soon as the storm passed they sped to the Financial District and began pumping out the flooded buildings.

In less than two months Hajjar and his Atlanta-based company, which specializes in repairing storm damage, billed commercial building owners for $4 million worth of work.

“Typically an area in a region when it’s hit with a storm this size, there are never enough resources or people or brainpower for management to run the jobs and so companies are called in from around the country to help out,” Hajjar said. “We were one of those companies.”

His experience highlights a simple economic fact: one person’s disaster is another’s opportunity.

During November alone, nearly two dozen out of state companies, including Reliable Restoration, legally set up shop in New York to do post-Sandy work. In addition, a number of new companies formed during that time to likely work on the recovery – companies with names like Hurricane Response Group LLC, Sandy Contracting LLC and HurricaneSandy Inc.

Joseph Seneca, an economist at Rutger’s University, said it’s not surprising to see such activity.

“There are economic opportunities and what you’re witnessing there with all those new business formations is the responsiveness of a market economy to profit opportunity,” Seneca said.

Newly formed companies and out of state firms aren’t the only ones getting post-Sandy work. Many well established -- sometimes politically-connected -- companies are winning major storm-related government contracts, records show.

Lucrative government contracts

In the city, officials set aside $927 million for emergency spending immediately after the storm. More than half of that -- $500 million – is for the Rapid Repairs Program. Under the program, the city has committed to getting roughly 12,000 storm-damaged buildings back to a livable condition with working heat, electricity and plumbing.

The city hired nine large general contractors including Gilbane Building Company out of Rhode Island and Sullivan Land Services from Texas. Gilbane got a $70 million contract from the city, records show. Sullivan’s was for $60 million.

The nine general contractors have hired about 140 companies as subcontractors. It’s unclear which firms. The city hasn't released the names of the companies despite repeated requests.

The subcontractors are putting thousands of people to work, according to the city.

On a recent day, Ernest Cole was stringing new electric wiring through the bare walls of a gutted Breezy Point home. Cole said he’s struggled to find steady work when he got a call from his old boss at Genmar Electric, one of the subcontractors.

Cole said he didn’t need to hear anything else once he heard the pay would be around $90 an hour. He was in.

“Times are hard, I’m not working. I’m coming. So I’m here,” Cole said.

The Building Trades Employers Association says post-storm spending has helped create as many as 20,000 temporary construction jobs in New York City.

Nick Masem, who works for Rockaway Beach Boulevard Construction Company, one of the nine general contractors in the program, said the recovery spending has been a boon for his industry.

“The electricians went from having five or six employees to now where they have almost 20 or 30. The same with the plumbers, so it’s been a great thing for the economy down here and especially all the local contractors,” Masem said. “I don’t think there’s one of them right now that’s out of work.”

The state has also been doling out post-Sandy work.

The state comptroller’s office recently posted online a list of Sandy-related contracts and payments the state made in the two months after the storm. The list shows $267 million of what will ultimately be billions of dollars in state spending.

Kate Gurnett, a spokeswoman for the state comptroller's office, said many of the contracts were issued under special emergency rules the governor used to speed the process.

“He did exempt some of these contracts from advertising, bidding and our approval. But we're still keeping track of them and they're all on our website,” Gurnett said.

The biggest contract reported so far went to a joint venture of John P. Picone Incorporated, Bove Industries and Tully Construction. The partnership won a $33 million contract from the state's transportation department to repair a two-mile storm-damaged stretch of Ocean Parkway.

Tully Construction, its president and related companies have given more than $125,000 in donations since 2006. Records show more than $24,000 of that went to Cuomo.

A spokesman for the Department of Transportation said politics played no part in the selection of the companies. He pointed to Tully’s vast experience working on large construction projects as a main reason the joint venture was chosen for the job.

Economic impact uncertain

There is some disagreement in economic circles about the ultimate impact of the storm on the regional and various local economies. The storm caused widespread damage, major economic losses and cost a number of jobs. But billions in recovery funds from the government, insurance company payouts, and private business and resident spending could act as something of a stimulus.

Seneca, the Rutger’s economist, led the most sophisticated modeling to date of Sandy’s impact on the economy. His team looked at New Jersey in particular and determined the storm spending will offset the economic losses from Sandy.

He said out of state companies working post-Sandy could have an impact on the recovery’s stimulative effect. But it depends on a number of factors such as if the companies hire local workers and how much of their revenue they spend locally on costs such as hotel rooms and food, he added.

Georgia-based Reliable Restoration hired 90 local workers, its co-owner Peter Hajjar said.

Pearl Kamer, an economist with the Long Island Association., thinks the losses were too great and came at too shaky a time at least so far as the Nassau and Suffolk county economies are concerned. As a result she thinks the storm will ultimately prove to have a negative economic impact despite the post-Sandy spending.

But she said it could take years to figure out.

“The truth is we don’t know what the ultimate impact is going to be,” Kamer said.

Homes Repaired One Block at a Time

The city and FEMA have teamed up to repair busted homes, “which has been an absolute nightmare,” according to small property owner Ken Swan.

He rents four apartments a block from the ocean in Rocakway Park, Queens. They were rendered uninhabitable by Sandy.

Swan registered with FEMA, got his homes inspected and made sure he was available nearly everyday for the Rapid Repairs contractors swarming the flood damaged areas. Last Wednesday, he stood in the frigid cold waiting for them. From Swan’s description, they’re worse than the cable guys.

“I’ve had to wait, they never showed up and when you call nobody has an answer for it, today, the appointment, the guy came an hour and a half late,” he said. “That’s the mass confusion part. They don’t have it all together yet.”

Since the storm, Swan’s apartments have been gutted, and a few tenants are already back. The apartments have squeaky new tile floors and fresh coats of paint. Through Rapid Repairs he’s had two boilers replaced, but with temperatures dropping he couldn’t wait, and replaced a third out of pocket for more than $5,000. That leaves one apartment without heat, so he’s waiting for Rapid Repairs.

Swan said part of the problem is that many of the contractors are from out of state and aren’t used to New York City apartments that have multiple addresses on one lot.

Finally, three contractors show up. They’re over two hours late to inspect his apartment, for the sixth time to see if the last boiler can be installed. They chat with Swan for a minute and get back in their trucks.

And, after sitting in their cars for 15 minutes, both contractors drive off leaving Swan waiting in the bitter winter winds another day.

The city says over 7,000 buildings have been completed, and Rapid Repairs has more than 2,000 left to go.

When the program started, contractors fixed orders as they came in, first come first served. Recently it switched, fixing one block at a time.

Across the street Colleen Dalton, 54, just got electricity and heat restored in her 3-story family home, courtesy of Rapid Repairs.

“We considered ourselves lucky. Being an American you think things are supposed to happen over night and that’s not the case in a disaster.”

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