Anytime there is a strong change in environmental or management conditions, plants are going to react in some fashion. Noted changes include removal of sod (changing the soil environment the arb roots are growing in, the water supplied has changed (If the water has always been supplied the plants may now be lacking sufficient roots to remove water deeper in the soil profile). You mention putting down rock later. i would consider an organic mulch over inorganic. Much better as it decomposes and returns nutrition to the plants. Digging a small vertical hole and accessing soil moisture will into the ground will tell you if these plants are being over watered. Using a dry wooden dowel rod pushed into the profile may be another way. comes out dry, may need to water, comes out dark, wet, muddy it is too wet. If your root rot theory is correct, the fungicides and oils applied to the needles will not help in this case. Suggest you contact your local extension office for a more focused and local response. Illinois is too far away to account for your local conditions.