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Homebuilding, economy conference focus

Dr. Loren Scott, president and CEO of Loren C. Scott & Associates Inc., was keynote speaker at the Louisiana Forestry Association mini-conference in November. (Photo by Jeff Zeringue)

Noted Louisiana economist Loren Scott had good news for the Louisiana Forestry Association (LFA) about home construction but a more cautious note about overall U.S. economic recovery.

Scott, who spoke at the LFA mini-conference in Alexandria in November, said demand for new homes would continue to climb with 1.54 million housing starts predicted for 2022 in the United States. Three new sawmills and three expansions have already been announced for the state to help meet the structural needs of these new homes.

“We had 1.4 million newly constructed homes (nationwide this year),” Scott said. “This is the highest since 1974.” One reason is the “work from home” option that is not going away. People are investing in a first home or trading up to a newer home as they spend more time away from an office.

The second reason for growth is the bulging millennial group who are reaching the age when home ownership is on their minds. Inflation and shortages have not stopped the home building frenzy.

But Scott was not as bullish on the total economic outlook. When the country closed down because of the coronavirus in April 2020, the Real Gross Domestic Product was down 31 percent.

“That was the worst quarter in 73 years,” he said.

As the country has weathered the surge in virus cases, the RGDP has rebounded up to 6.7 percent in the second quarter 2021.

A big part of that number is personal consumption or personal spending. The personal income bumps from the stimulus checks, Scott said, boosted what otherwise might have been a very low rebound.

He predicted problems for Louisiana with the two spending bills in Washington. The U.S. corporate tax rate will move to the third highest and the top rate on personal income tax will be the highest in the world. Higher taxes mean less hiring and production, he said. It also makes other countries look more inviting.

Another problem peculiar to our state is the coming focus on oil, natural gas and chemical production.

“We are about to experience a tsunami of regulations,” he predicted. The administration has proposed to reinstate the Superfund Tax on these companies based on production. The president has already signed into law a measure to “modernize regulatory review” that includes wording that promotes, according to the law, the “regulatory benefits that are difficult or impossible to quantify” instead of traditional measures.

Currently oil prices are higher but once the logjam caused by Hurricane Ida in the Gulf subsides and the new increased pumping from the Middle East is in play, then prices should moderate, he said.

Natural gas has also been affected by damage from Ida. He predicts a resurgence of interest in the Haynesville Shale area.

Problems with Logging Insurance

Michael Beardsley with the North American Timber Producers also spoke at the conference that attracted about 150 members and exhibitors.

He helps his customers in the eastern part of the U.S with their insurance needs and works to reduce safety risks. He has seen problems and pitfalls for the logger over the years.

In 2019 there were 91 fatalities in the U.S. logging industry making it the most dangerous occupation in the country. Fatalities in all big truck crashes increased in 2018 although overall traffic fatalities were down. Of the 4,110 big truck fatalities in the U.S. in 2019, 16 per cent were occupants of the truck. The other 84 per cent were in the other vehicle or a pedestrian.

By the nature of their truck and load, log trucks also involve more rollover accidents than other big trucks, he said. But the most common incident involving a fatality is a collision with another vehicle.

The number of accidents and fatalities, for all big trucks including log trucks, dipped in 2014 but then began to climb again. Beardsley said the increase coincided with increased cell phone use across the country.

“Modern smart phones propelled the risks of distracted driving to a whole new level,” he said. States who have legal marijuana are also seeing it affect crash rates. He reminds people that cannabis can be legal to buy but is still not legal under the federal CDL license.

“Many insurance companies no longer write log truck insurance in Louisiana,” he said.

His company does not work in either Louisiana or his home state of Florida.

The trucks and the products that are hauled are much different in the South than in the eastern territory. But those differences are considered riskier. Other factors specific to the state also serve as red flags, he said. These are:

• More CDL drivers who take the verbal rather than the written test;

• Average verdict size from 2010 to 2018, rose from $2.3 million to $22.3 million;

• High drug test positivity rate;

• Sporadic work depending on weather and conditions;

• High per capita attorneys (fifth) for 27th in population;

• Deteriorating infrastructure in roads, bridges, etc.

He advised that active safety systems installed on trucks are good only if they are used to monitor for violations and make corrective changes.

If not, it will be more evidence for your opposing attorney.

He did praise the recent tort reforms that were made in the Louisiana legislature, but he said more work is needed in this area.

Beardsley predicted that there will be restrictions or exclusions on subcontractor haulers, and he sees increasing retirements of experienced local insurance agencies. Also some states, starting with California, will require newer trucks and trailers.

Litigation losses have increased dramatically, Beardsley said. One study indicated that the average verdict size over a million dollars had increased 1,000% from $2.3 million to $22.3 million.

Risk purchasing groups in which similar businesses band together to purchase insurance have been used in the last few years, but he advised due diligence on members choices. Some businesses have also opted to retain a larger portion of their exposure through large deductible plans.

Outgoing LFA President speaks

Tony Diaz, LFA president for the past two years, also spoke briefly about the mission of the forestry association and how the LFA, as the oldest forestry group in the state, weathered the pandemic.

“We’ve had a lot of zoom meetings,” he said. “But it is not a replacement for meeting in person.” Both the 2020 and 2021 large conferences were canceled due to COVID and the mini-conference replaced that as the situation improved.

He praised the association executive committee as the “real engine for making things happen” and the seven-person LFA staff as “really good at what they do.”

Landowners, loggers and companies in the LFA all have specialized roles, but he said the LFA’s “primary role is collaboration — getting all these different interests to pull together.”

Diaz said the association membership committee has worked on diversifying its base. It is a hard task because forest landowners in the state historically are not a diverse group.

“We have gotten more women involved already,” he said.

The LFA association, led by Buck Vandersteen as executive director, will turn 75 years old in 2022. David Grassi of Crest Industries in Pineville is the new LFA president for next year.

(Janet Tompkins is a former editor of Forests & People magazine who retired in 2016.)


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