The most storied franchise in hockey (arguably), the Detroit Red Wings, will soon be getting a new home in downtown Detroit. After breaking ground in 2014, crews are on-site working six days a week to ensure that the arena will be ready to host Red Wings fans along with fans in the away colors by 2017. The newly designed arena is rumored to have an exterior that is capable of changing colors, a larger concourse, “gondola” seating near the rafters, practice ice and even team training rooms. The new arena sounds like a state of the art facility but all of these bells and whistles come at a price to the construction industry – at least from a local perspective. Projects of this scale take a lot of hours and manpower from local construction contractors, and could end up costing them in the long run, especially contractors in the immediate area.
As previously mentioned, crews are working six days a week in order to complete this massive job on time. As resources are sucked up from local unions by the contractors working on the arena contract, many companies that aren’t involved in the arena construction are working hard to keep their best workers busy so that they aren’t reassigned to work on the arena. As a result of the reduction in available workforce, contracts that have already been secured are being pushed back, or wind up being more costly than the contractors budgeted. Leaders at these organizations have also expressed concern that future jobs could be more costly with higher quotes or lower margins due to the lack of availability of workers with more overtime needed. This will either cost companies more to complete the jobs or the customer will have to pay more for the work to be done in a timely fashion.
Local contractors are leery of bidding on other jobs because all of their resources are tied up in the arena construction project, while others are concerned about losing their most capable employees to the arena construction. Profit margins on newly secured fixed contracts could go down considerably for some of these contractors as labor costs rise due to overtime and longer project timelines. One thing is for sure, contractors will breathe a sigh of relief when the job is done and the new arena opens in 2017.
By Dennis LaPorte, CPA
Dennis LaPorte is a managing director of UHY Advisors MI. Inc., and a leader in the firm’s tax department. He is an active member of the firm’s national construction group and has worked with many contractors over the years. LaPorte has over 35 years of experience providing a wide range of tax services to privately held middle market companies.