Final Report: Memphis Stone and Gravel Analysis Prepared by John E. Gnuschke, Ph.D. Prepared for Memphis Stone and Gravel Company October 27, 2010
Final Report:Memphis Stone and Gravel Analysis
Prepared byJohn E. Gnuschke, Ph.D.
Prepared forMemphis Stone and Gravel Company
October 27, 2010
1Final Report: Memphis Stone and Gravel Analysis
T his report is related to a request by Memphis Stone and Gravel Co. to extend its currently
permitted Atoka aggregate facility in Tipton County to adjacent property in Shelby County.
The expansion will entail 173 acres of leased property in Shelby County which is part of
an aggregate deposit of sand and gravel that is one of the few remaining in Shelby County. Mining
of the property would occur in the future—13–15 years. The extraction process would be designed
to minimize disruption to area home owners and maximize safety on county and state roads. Over
70.0 percent of the sand and gravel generated from this deposit will serve the needs of Shelby
County businesses. The future of Memphis Stone and Gravel Co. operations in Shelby County may
be at stake. The North Plant operations that exist in Shelby County will be exhausted over time, and
the sand and gravel operations will shift to the Atoka site, currently permitted in Tipton County,
and its site in DeSoto County.
Based on a review of data on market conditions for stone, sand, and gravel, an analysis of condi-
tions in the industry in Shelby County, and a review of information on the impact of developing new
extraction sites, the following observations are made:
1. Sand and gravel and aggregates, in general, are essential ingredients in the construction
industry throughout the nation, and Shelby County is no exception. Every construction
project requires large amounts of sand and gravel for concrete, asphalt, and other uses. The
data in Table 1 show the consumption of sand and gravel in the nation, its average price, and
total employment for the period 2005–2009. It is clear that the economic recession had a
tremendously negative impact on this industry. Consumption fi gures fell by 37.8 percent
between 2005 and 2009, and employment levels fell 19.4 percent over the same period.
With the recovery and the stimulus packages, employment and sales numbers will rise over
time, but the rise may be delayed because of the pressure to deal with other economic is-
sues like government debt and defi cit levels.
The price of sand and gravel continued to rise over the period as the costs of develop-
ment and extraction rose. One of the critical factors in highly-constrained natural resource
Table 1. Sand and Gravel Construction in U.S., 2005–2009
Salient Statistics 2005 2006 2007 2008 2009E
Consumption (Apparent) 1,290 1,320 1,240 1,050 802
Price (Average Value, Dollars Per Ton) 5.86 6.47 7.01 7.48 7.70
Employment (Mines, Mills, and Shops) 37,700 38,500 38,000 35,200 30,400E=Estimate
Source: Mineral Commodity Sumaries 2010, U.S. Geological Survey.
2Final Report: Memphis Stone and Gravel Analysis
markets is that demand can fall, and supply limitations and cost of production increases can
result in price increases for fi rms still seeking the resource. This will be the case locally if
supply constraints limit local options for sand and gravel and production and transportation
costs increase. (See Figure 1).
The data in Table 2 indicate that similar issues have existed for years in Tennessee. Since
2000, the metric tons of sand and gravel sold in Tennessee have declined by 21.7 percent,
while the unit value of average price per metric ton has increased by 45.8 percent. If sup-
ply constraints continue to limit the production of sand and gravel in urban markets, price
increases for sand and gravel will continue. Subsequently, the cost of construction projects
will rise and be refl ected in production, price, and profi t conditions for businesses, consum-
ers, and government. Sand and gravel costs tend to be a small factor in the total cost of most
construction projects. An inelastic demand for sand and gravel is refl ected in the pricing
power of producers.
Figure 1. Sand and Gravel Short-Term Supply and Demand
3Final Report: Memphis Stone and Gravel Analysis
Tabl
e 2.
Con
stru
ctio
n Sa
nd a
nd G
rave
l Sol
d or
Use
d in
Ten
ness
ee, 2
000–
2001
and
200
7–20
08
2000
2001
2007
2008
Qua
ntity
(0
00
Met
ric
Tons
)Va
lue
($00
0)U
nit
Valu
e
Qua
ntity
(0
00
Met
ric
Tons
)Va
lue
($00
0)U
nit
Valu
e
Qua
ntity
(0
00
Met
ric
Tons
)Va
lue
($00
0)U
nit
Valu
e
Qua
ntit
y (0
00
Met
ric
Tons
)Va
lue
($00
0)U
nit
Valu
e
Tenn
esse
e8,
760
$47,
000
$5.3
78,
350
$46,
400
$5.5
67,
310R
$52,
200R
$7.1
46,
860
$53,
000
$7.8
3R =
Revis
ed.
Sour
ce: S
and
and
Grav
el, C
onst
ruct
ion—
2008
(Adv
ance
Rele
ase)
, U.S
. Geo
logica
l Sur
vey.
4Final Report: Memphis Stone and Gravel Analysis
Tables 3–5 include data on the consumption, value, price, and use of sand and gravel
in the U.S., Tennessee, and West Tennessee (the latest data available). The cost of sand
and gravel is a factor in every construction project and is particularly important for large
infrastructure projects like airports, roads, streets, sewers, bridges, utilities, environmental
projects, large buildings, warehouses, and retail shopping malls where asphalt and concrete
are used extensively. In each market, the primary uses of sand and gravel are for concrete,
asphalt, road base, and fi ll.
Sixty-fi ve to 70.0 percent of the sand and gravel produced at Memphis Stone and Grav-
el’s two current facilities, one operating in Shelby County and one in DeSoto County, is
used for concrete and asphalt production in this community. This is consistent with the
state and district data use patterns for sand and gravel shown in Tables 4 and 5.
Table 3. Construction Sand and Gravel Sold or Used in the U.S. by Major Use,1 2008
UseQuantity (000 Metric Tons)
Value(000)
UnitValue
Concrete Aggregates (Including Concrete Sand) 207,000 $1,710,000 $ 8.28
Plaster and Gunite Sands 9,250 82,300 8.91
Concrete Products (Blocks, Bricks, Pipe, Decorative, etc.) 3,280 27,600 8.41
Asphaltic Concrete Aggregates and Other Bituminous Mixtures 50,500 541,000 10.71
Road Base and Coverings 106,000 677,000 6.38
Road Stabilization, Cement 3,110 22,600 7.25
Road Stabilization, Lime 2,190 13,900 6.36
Fill 60,300 272,000 4.50
Snow and Ice Control 4,180 28,800 6.89
Railroad Ballast 711 7,740 10.89
Roofi ng Granules 129 2,910 22.52
Filtration 401 4,840 12.07
Golf Course Maintenance Sand 1,050 10,900 10.39
Other Miscellaneous Uses 5,620 59,100 10.51
Unspecifi ed:2
Actual 202,000 1,490,000 7.39
Estimated 385,000 2,830,000 7.34
Total or Average 1,040,000 $7,780,000 $ 7.48 1Data are rounded to no more than three signifi cant digits; may not add to totals shown.2Reported and estimated production without a breakdown by end use.
Source: 2008 Minerals Yearbook: Sand and Gravel, Construction (Advance Release), U.S. Geological Survey.
5Final Report: Memphis Stone and Gravel Analysis
Table 4. Construction Sand and Gravel Sold or Used in Tennessee by Major Use Category,1 2007
UseQuantity (000 Metric Tons)
Value(000)
UnitValue
Concrete Aggregate and Concrete Products2 2,820 $21,300 $ 7.55
Asphaltic Concrete Aggregates and Other Bituminous Mixtures 285 1,750 6.14
Road Base and Coverings 400 2,100 5.24
Fill 94 1,020 10.83
Unspecifi ed:3
Actual 1,160 8,170 7.02
Estimated 2,400 17,000 7.00
Total or Average 7,140 $50,900 $ 7.141Data are rounded to no more than three signifi cant digits, except unit value; may not add to totals shown.2Includes plaster and granite sands3Reported and estimated production without a breakdown by end use.
Source: 2007 Minerals Yearbook: Tennessee (Advance Release), U.S. Geological Survey.
Table 5. Construction Sand and Gravel Sold or Used in West Tennessee by Use,1 2007 (000 Metric Tons and $000)
Use
West Tennessee
Quantity ValueUnit
Value
Concrete Aggregate and Concrete Products2 1,780 $11,500 $ 6.46
Asphaltic Concrete Aggregates and Road Base Materials 535 2,860 5.35
Fill 94 1,020 10.85
Unspecifi ed:3
Actual 748 6,020 8.05
Estimated 1,280 8,960 7.00
Total or Average 4,430 $30,300 $ 6.83
W=Withheld to avoid disclosing company proprietary data; included in “Total or Average.”—Zero.1Data are rounded to no more than three signifi cant digits, except unit value; may not add to totals shown.2Includes plaster and granite sands3Reported and estimated production without a breakdown by end use.
Source: 2007 Minerals Yearbook: Tennessee (Advance Release), U.S. Geological Survey.
6Final Report: Memphis Stone and Gravel Analysis
As the state and local population and economies grow, the demand for sand and gravel
grows. The rapid growth in the utilization of existing deposits and the exhaustion of current
facilities makes the need for fi nding and permitting new sites an imperative for the commu-
nity if the cost increases for sand and gravel are to be avoided. While unit value fi gures tend
to be lower in West Tennessee than in the state in general and in the nation, limitations on
production at sites close to the urban core of the Memphis metro area will increase prices
in the local market.
Maps 1–3 provide aerial views of the locations of current operations at the North Plant
of Memphis Stone and Gravel and also the planned Atoka facility. Map 1 shows the locations
of the sand and gravel operations of Standard Construction and Memphis Stone and Gravel.
The gravel operations are surrounded by residential developments in spite of the fact that
largely undeveloped tracts of land are in abundance in the area.
Map 2 shows the residential properties that surround the operating extraction facilities
and the general dates of the developments. Memphis Stone and Gravel’s operations were
started in 1983, and Standard Construction’s operations were started around 1993. Many
of the residential areas have been developed since the extraction facilities were put in place.
In fact, many of the surrounding properties were developed after 1990 and 17.8 percent
were developed after 2000. The presence of the extraction sites did not prevent the devel-
opment of the surrounding area.
Map 3 shows the Atoka facility already permitted in Tipton County and under consider-
ation in Shelby County and indicates that a number of residential properties exist in the sur-
rounding area. Much like the area around the Memphis Stone and Gravel North Plant that
had properties in the area prior to development, the Atoka site is in an area that is partially
developed but is still primarily rural agricultural land. It is true that for most urban areas, it
is nearly impossible to locate any extraction site or any industrial site that does not impact
a property owner. The confl ict over property rights always exists when two sets of property
owners have confl icting interests.
The data in Tables 6 and 7 are for both the existing North Plant of Memphis Stone and
Gravel and the Standard Construction facility in Northern Shelby County and the proposed
site that exists in both Tipton and Shelby County. The data indicate that 43 homes were
constructed with a quarter mile of the existing facilities in Shelby County since 2000. Of
the properties surrounding the facilities in 2010, average appraisal values had increased
from $88,687 in 2000 to $129,617 in 2010, a 47.0 percent increase in value over the
7Final Report: Memphis Stone and Gravel Analysis
Map 1. Standard Construction and Memphis Stone and Gravel
8Final Report: Memphis Stone and Gravel Analysis
Map 2. Standard Construction and Memphis Stone and Gravel, Surrounding Date of Home Construction
9Final Report: Memphis Stone and Gravel Analysis
Map 3. Atoka Aggregate Facility
10Final Report: Memphis Stone and Gravel Analysis
ten-year period. The maximum appraised value for a home in the immediate area rose from
$435,900 to $642,400, a $206,500 increase in value. It is easy to see from the data that the
presence of a sand and gravel facility did little to constrain the growth of the housing market
or the value of housing in the surrounding area.
The data in Tables 6 and 7 also show that the properties that surround the proposed
site are primarily in Tipton County (69.0 percent) and only 56 properties were close to the
proposed site in Shelby County. The properties have a 2010 maximum appraisal value of
$473,000 and a minimum appraisal value of $17,000. The presence of properties in the
surrounding area does not mean that property values will fall or that other residential prop-
erties will not be constructed in the area. Area growth patterns should follow the patterns
of current property.
Property values should continue to refl ect broader market conditions and not be con-
strained by the presence or absence of the sand and gravel extraction facility. Other research
on the impact of extraction facilities on property values is mixed, some showing small nega-
Table 6. Appraised Values for Surrounding Parcels, 2010
Number of Residential
Properties within .25 miles*
Average Appraisal
Total Appraisal
Maximum Appraisal
Minimum Appraisal
Standard Construction and Memphis Stone and Gravel* 242 129,617 31,367,200 642,400 1,400
Atoka Aggregate Facility 179 154,529 27,660,700 473,000 17,000
Atoka Aggregate Facility (Shelby County) 56 193,542 10,838,400 473,000 17,000
Atoka Aggregate Facility (Tipton County) 123 136,766 16,822,300 321,400 12,000
*Includes Arlington Way subdivisions for Memphis Stone and Gravel.
Note: Calculated from 20101 Shelby and Tipton counties assessor data.
Table 7. Appraised Values for Surrounding Parcels, 2000
Number of Residential
Properties within .25 miles*
Average Appraisal
Total Appraisal
Maximum Appraisal
Minimum Appraisal
Standard Construction and Memphis Stone and Gravel 199 $89,687 $17,847,900 $435,900 $7,700
Note: Calculated from 20101 Shelby and Tipton counties assessor data.
11Final Report: Memphis Stone and Gravel Analysis
tive impacts and others showing little impact at all. In general, the studies indicate insignifi -
cant impacts on property values for most facilities.
2. Sand and gravel deposits are limited to a few sites in Shelby County and West Tennessee
(see Maps 4–7). Those sites are frequently constrained by the expansion of housing into
previously all rural areas used for agricultural activities. The intersection of the highly lim-
ited sites for the extraction of sand and gravel and the increasing transition of agricultural
land into residential property creates confl icts between property owners, especially during
permitting and the initial phases of development.
Numerous residential developments surround extraction sites like those in North Shel-
by County. Many of those developments took place after the extraction process was well
underway. Other sites in Shelby County, like the Standard Construction site in Collierville,
have been shown to co-exist with high-value residential areas without unusual problems.
The Collierville site is adjacent to expensive residential areas that were developed long after
the sand and gravel extraction process started.
Sand and gravel extraction facilities can be good neighbors and great community citi-
zens, and Memphis Stone and Gravel Co. fi ts that description. Memphis Stone and Gravel
has policies and practices in place that address many of the issues raised by opponents.
Crushed stone, sand, and gravel producers are regulated by a number of state and local
agencies. Producers are well versed in the safe operation, conservation, and reclamation
requirements in areas surrounding each facility.
3. Memphis Stone and Gravel Co. is a local company with a long history of being a respon-
sible employer, taxpayer, and signifi cant contributor to the economic strength and vitality of
Memphis and Shelby County. Memphis Stone and Gravel’s facilities are estimated to have
supplied approximately 65.0 percent of the concrete aggregate in this area between 2005
and 2009. The economic impact of the operation of Memphis Stone and Gravel is shown
in Tables 8 and 9. The direct expenditure of $11,815,666 in 2010 resulted in over $21.4
million in total economic activity, $5.7 million in earnings and 96 jobs. The expenditures
and the economic impact were primarily in the Memphis MSA with over $16.1 million in
output, $4.3 million in earnings, and 72 jobs associated with Memphis Stone and Gravel
operations.
12Final Report: Memphis Stone and Gravel Analysis
Map
4. P
oten
tial A
reas
of C
rush
ed S
tone
Agg
rega
te a
nd P
redo
min
ant B
edro
ck T
ypes
in T
hese
Are
as
Sour
ce: U
.S. G
eolog
ical S
urve
y.
13Final Report: Memphis Stone and Gravel Analysis
Map
5. P
oten
tial A
reas
in th
e M
Id-S
outh
of C
rush
ed S
tone
Agg
rega
te a
nd P
redo
min
ant B
edro
ck T
ypes
in T
hese
Are
as
Sour
ce: U
.S. G
eolog
ical S
urve
y.
14Final Report: Memphis Stone and Gravel Analysis
Map
6. P
oten
tial S
ourc
e Ar
eas
of S
and
and
Gra
vel A
ggre
gate
by
Geo
grap
hic
Reg
ion
Sour
ce: U
.S. G
eolog
ical S
urve
y.
15Final Report: Memphis Stone and Gravel Analysis
Map
7. P
oten
tial S
ourc
e Ar
eas
in th
e M
id-S
outh
of S
and
and
Gra
vel A
ggre
gate
by
Geo
grap
hic
Reg
ion
Sour
ce: U
.S. G
eolog
ical S
urve
y.
16Final Report: Memphis Stone and Gravel Analysis
It should be noted that the expenditures and sales for Memphis Stone and Gravel have
been down dramatically as a result of the Great Recession. Sales declines of 60.0 percent
from pre-recession levels have been experienced by Memphis Stone and Gravel. If the
2010 impact estimates were increased to pre-recession levels, the output, earnings and
employment levels reported in Tables 8 and 9 will more than double. While the return to
pre-recession sales and expenditure levels will not occur in 2011, over time the impact of
Memphis Stone and Gravel will grow from the levels reported for 2010.
In addition to the $11.8 million operating expenditures, Memphis Stone and Gravel
has an annual expenditure level for administrative services of approximately $770,000 for
the Memphis area. This will increase the impact estimates by an additional 7.0 percent
and will increase total impacts for output to $22.92 million, earnings to $6.12 million, and
employment to 103 people. As the operating expenditures grow in this area, the impact of
administrative expenditures will also grow.
At the current time, initial estimates of the cost of constructing the new facility in
Tipton and Shelby County will be in excess of the $3.4 million in expenditures from the
last plant constructed by Memphis Stone and Gravel. Those initial plant construction costs
were not included in the impact estimates shown in Tables 8 and 9.
Table 8. Economic Impact of Memphis Stone and Gravel Company Expenditures, Nominal Dollars in Millions
Direct Expenditures Total Impacts
Year Amount Output Earnings Employment
2010 $11,815,666 $21,420,621 $5,721,145 96
Table 9. Economic Impact of Memphis Stone and Gravel Company Expenditures in the Memphis MSA, Nominal Dollars in Millions
Direct Expenditures Total Impacts
Area Amount Output Earnings Employment
Memphis MSA $8,907,831 $16,149,006 $4,313,172 72
17Final Report: Memphis Stone and Gravel Analysis
With two of the facilities closed and the other two having three- to fi ve-year estimated
use lives, it is important that Memphis Stone and Gravel be allowed to develop alternative
sites in Shelby County. The availability of locally-produced sand and gravel provided by
multiple competitors keeps prices low and the quality of services high in West Tennessee.
Locally-produced sand and gravel reduces construction costs and generates tax revenues
in state and local governments. Travel related costs could double or triple if the Memphis
market has to be served from locations in Mississippi. Reducing the distance to the market
increases the safety of the community by reducing the mileage necessary for trucking sand
and gravel to fi nal end-user sites. Low-cost sand and gravel increases the viability of some
construction projects and increases construction activity and employment in Shelby County.
Having to go to Mississippi for sand and gravel increases construction costs, reduces lo-
cal taxes, and reduces local employment. During the current recession, job creation is our
number one priority, and sending jobs to Mississippi should be the last alternative for Shelby
County. Tennessee, and particularly Shelby County, needs the jobs, and they need the tax
revenues generated by both the extraction process and the sales tax revenues. Previous
estimates of tax revenues generated from a much smaller extension of the North Plant site
were over $662,000 annually and did not account for cost reductions for the industry of
over $1.2 million annually. The currently proposed addition would generate tax revenues far
in excess of these estimates. Clearly, the industry, the citizens of Shelby County, and local
government stand to gain from the approval of this project.
4. Nationally and locally, residential property starts and permits are currently down 25.0 and
33.0 percent, respectively, from their 2006–2007 peaks. The construction industry has
been one of the hardest hit by the recession. Recent discussions about federal and state bud-
get defi cits, rising interest rates, declining mortgage tax benefi ts, and continued declines
in housing and retail property prices are a bad omen for the recovery of the construction
industry.
Employment levels in construction statewide have fallen from 106,000 in September
2009, just after the recession was declared to be over, to 101,600 in September 2010, a
loss of 4,400 jobs that provide middle-class families opportunities for economic success.
The economic impact of $1 million in construction spending is shown in Tables 10 and
11. The estimates shown in Table 10 are in 2006 dollars, and the estimates in Table 11 are
for 2010. The data for 2010 show that for every million dollars in construction spending,
18Final Report: Memphis Stone and Gravel Analysis
$2.26 in total output or economic activity would be generated, which means that $725,900
in earnings and 20 jobs would be created. It is easy to see that the impact of construction
spending is very positive for the state and local economies, and further declines in this in-
dustry should be avoided.
The poor condition of the state’s economy is a clear refl ection of the problems of the
construction industry and all the people employed in construction jobs. Employment de-
clines in the construction industry have led the economy in its decline. Nothing can or will
happen with construction employment until the economy and the construction industry
recover. Many of the stimulus dollars provided to state and local areas were intended to
promote the recovery of the construction industry. The growth in the demand for sand and
gravel is an integral part of the recovery process.
Table 11. Economic Impact of Construction Expenditures in the Memphis MSA, Nominal Dollars in Millions
Direct Construction Expenditures Total Impacts
Year Amount Output Earnings Employment
2010 $1,000,000 $2,263,300 $725,900 20
Note: $1,000,000 in construction expenditures in the Memphis MSA is estimated to result in an indirect output impact of over $1.2 million for a total output impact of $2.26 million (the production of goods and services), while supporting a total of 20 jobs and total earnings of over $725,000 during the construction period.
Table 10. Economic Impact of Construction Expenditures in the Memphis MSA in 2006 Dollars
Expenditures
Mulitpliers Impacts
Final-Demand Output (1)
Final-Demand Earnings (2)
Final-Demand Employment (3)
(Number of Jobs) Output Earnings Employment
$885,053 $2.2633 $0.7259 $11,500 $2,003,141 $642,460 20
(1) Each entry in column 1 represents the total dollar change in output that occurs in all industries for each additional dollar of output delivered to fi nal demand by the industry corresponding to the entry.
(2) Each entry in column 2 represents the total dollar change in earnings of households employed by all industries for each additional dollar of output delivered to fi nal demand by the industry corresponding to the entry.
(3) Each entry in column 3 represents the total change in number of jobs that occurs in all industries for each additional $1 million of output delivered to fi nal demand by the industry corresponding to the entry.
Note: Expenditures were adjusted to 2006 dollars since the multipliers are expressed in 2006 values. Failing to do so would overstate all impacts.
Source of Multipliers: U.S. Bureau of Economic Analysis, Regional Economic Analysis Division.
19Final Report: Memphis Stone and Gravel Analysis
5. Memphis Stone and Gravel Co. needs to develop one of its few remaining sand and gravel
sites in order to accommodate the expansion of the local economy. Property owners should
be allowed to use their property and develop it as they see fi t. Otherwise, they suffer a fi nan-
cial loss because of the decline in the value of the property. The Memphis Stone and Gravel
site cannot be developed without someone being impacted. Locating extraction facilities
near urban communities simply cannot be done without impacting some property owners.
Properties closest to the facility are impacted the most, but the impacts on property values
are typically small, if they exist at all.
Minimizing the negative impact on existing property owners while maximizing the posi-
tive benefi ts should generate substantial net long-term benefi ts for the community in gener-
al. If the site is developed, used for producing low-cost sand and gravel for the local market,
and then reclaimed for subsequent use, the community stands to gain from all aspects of
the project. If zoning prevents local and minimum cost production, then everyone in the
community will pay the price of increases in production and distribution costs. Large price
increases will occur if stone and gravel have to be imported from Tate County, Mississippi
(one alternative site for Memphis Stone and Gravel). Competing land use plans, zoning
requirements, and regulations work against any site near an urban area in spite of the fact
that urban areas generate most of the demand. Assuring that adequate supplies of sand and
gravel are available to support urban expansion in the future will require leadership, long-
range planning, and concern for the welfare of the community.
6. The economic impact on the community from price increases for sand and gravel may not be
large, but it will make all construction projects cost more money. Construction of an aver-
age home requires about 250 tons of aggregate, and a 100,000-square-foot offi ce building
requires 5,000 tons of aggregate. A 100,000-square-foot retail center would require 2,500
tons of aggregate without counting roads and parking lots. Increases in the price of sand,
gravel, and concrete will have a negative impact on construction in Shelby County if costs
rise as estimated. If average prices were to rise $3–$5 per ton, the cost of a retail center
would increase by $7,500 to $12,500.