Sunday, November 21, 2010

Rationality and Experience to Guide Chicago Housing and Economic Development

Outgoing Mayor Richard M. Daley is intent on leaving his imprint on city government even after he leaves office early next year. He is busy reorganizing the city’s administration in the way he thinks best, and appointing interim heads to new departments, leaving the next mayor to decide whether or not to keep them. Kudos to Daley for one interim appointment announced last week, which should keep economic and housing development moving in all Chicago neighborhoods during the inevitable transition confusion once a new mayor is elected.

Daley appointed 58 year old Andrew Mooney, executive director of Local Initiatives Support Corp. Chicago, to be interim head of the newly created Department of Housing and Economic Development. The new department combines the responsibilities of the former Department of Community Development with the former Department of Zoning and Land Use, except for zoning inspections, which will now fall under authority of Chicago’s building department.

Mooney brings enviable experience in making community development work to his new position. Since it was started in 1980, his organization has invested $150 million in grant money in Chicago area neighborhoods, developing 27,000 housing units and 4.5 million square feet of retail, commercial, and community center space. Mooney’s able leadership has also attracted equity investment totaling $317 million to projects his organization supported, leveraging an estimated $3.7 billion in development throughout the Chicago metropolitan area. Some examples of housing developments succeeding under Mooney’s leadership include the 86 unit Churchview Supportive Living Facility in southwest side Chicago Lawn, the 87 unit Harold Washington Unity Cooperative affordable housing development in West Humboldt Park, and Bronzeville’s 3,000 unit Oakwood Shores development, located just south of Ellis Park.

There are so many candidates for mayor running in the February election that it is impossible to predict the outcome, much less the appointments of department heads a newly elected mayor might make. We can only hope that whichever candidate ultimately replaces Daley has the good sense to keep Mooney’s knowledge, experience and motivation working for Chicago’s neighborhoods after he or she takes over the reins.

Saturday, November 20, 2010

High Speed Rail Shuffle Could Be Chicago’s Boon

Newly elected governors in Wisconsin, Ohio and Florida – all of whom have announced their opposition to high speed rail construction projects in their states – could be the secret ingredient in increased funding for high speed rail construction projects and rolling stock manufacturing jobs in the Chicago area. Under the stimulus appropriations from early 2009, $8 billion was set aside to fund high speed rail construction projects planned but not yet implemented across the United States. In January of this year the Obama administration announced allocation of $1.23 billion of that money to Illinois, to fund high speed rail corridors between Chicago and St. Louis, Missouri, and between Chicago and Milwaukee, Wisconsin.

Of the remaining $6.77 billion in high speed rail appropriations, $810 million was awarded to Wisconsin for construction of a high speed line between Milwaukee and Madison, and also the Wisconsin portion of the Chicago to Milwaukee service. Another $400 million was awarded to Ohio, for high speed connections between that state’s capitol, Columbus, and Cleveland and Cincinnati, Ohio’s other two major cities. Florida was awarded $2.06 billion for a high speed rail link between Orlando and Tampa.

Under the “claw back” provisions of the stimulus legislation, any money allocated to particular projects, but not spent by the states winning the funds, must be reallocated among other proposers who got less than they asked for in the initial grant process. Florida’s governor elect Rick Scott, Ohio’s governor elect John Kasich, and Wisconsin’s governor elect Scott Walker have all publicly stated their opposition to going forward with the high speed rail construction for which these federal stimulus funds were awarded, putting a total of nearly $3.29 billion back in play among the states seeking federal funds for high speed rail development projects.

IDOT’s original funding proposal under the stimulus appropriation sought a total of $4.5 billion, and the clawed back funds could more than make up the entire shortfall from the Illinois grant request. Though it is unlikely Illinois will be given the entire amount, U. S. Transportation Secretary Ray LaHood said last Monday, November 15, that he will soon be announcing the reallocation of the $1.2 billion coming back from Wisconsin and Ohio. Several governors who support high speed rail development, including Illinois Governor Pat Quinn, will be holding their breath until LaHood’s announcement is official, and maybe even longer, until Florida’s $2.06 billion grant is reallocated.

Quinn is already wooing Talgo, Inc. the rolling stock manufacturer that recently opened a plant in the Milwaukee facility formerly owned by Tower Automotive, where Talgo expected to put 125 people to work building cars for the Chicago to Milwaukee high speed rail corridor, which plans to include stops at Mitchell Field, Sturtevant, Wisconsin, and Glenview, Illinois, as well as the terminals in downtown Chicago and Milwaukee. Talgo has said it would consider moving to Illinois after fulfilling its spring 2012 orders for two high speed trains in Oregon.

So, because of politics in three other states, Illinois could end up a much bigger winner in the competition for high speed rail funding and jobs that initially seemed possible.

Friday, November 19, 2010

House Rejects Unemployment Extension

Yesterday the House of Representatives voted on a bill to extent the application deadline for the next tier of federal unemployment benefits to February 28, 2100, and the bill was defeated 258 in favor to 154 against. The legislation would have required 275 votes in favor to pass under pay as you go rules, since it included no revenue raising measure to pay the $12.5 billion cost of the benefit extension. As a result, up to 4 million out of work citizens, and their families, will lose their jobless benefits on the current filing deadline, which is November 30, 2010.

State governments pay the first 26 weeks of unemployment benefits, and after that additional federal payments can last up to an additional 73 weeks, for a total of 99 weeks of benefits: just 5 weeks short of 2 years before payments are cut off. The last extension passed by Congress was for 6 months at a cost of $34 billion. In the last 3 years the unemployed have collected $319 billion in jobless benefits, with 8.5 million citizens now collecting benefits. Of the 8.5 million, 4.8 million have already exhausted their state benefits, and are now collecting federal payments.

The federal government has never cut off benefit extensions when the unemployment rate has been above 7.4%. With today’s rate at 9.6%, Congress is likely to ultimately pass further extensions, but not before the November 30 cutoff. The debate rages on in the House about how to pay for the cost of an extension, which Democrats argue should last another year. Republicans want to use unspent stimulus money to pay for the extension, but Democrats oppose raiding any pot of money appropriated for job creation.

The House/Senate Joint Economic Committee reports that failure to continue extended unemployment benefits could take as much as $80 billion out of today’s already weakened economy, since families receiving benefits spend the money immediately because they are already living so close to the edge financially. Nevertheless, deficit hawks in the House will likely continue to oppose any bill not fully funded under pay as you go rules.

Dodd-Frank Consumer Credit Reforms Under Assault

Do you accept credit cards in payment from your customers? Does your business use credit cards to pay vendors? Either way, you will be affected by the new consumer protection rules to be promulgated by the Consumer Financial Protection Bureau under the Dodd-Frank financial regulatory reform bill signed by President Obama in July. One of the top Republican congressmen on the Financial Services Committee, Representative Jeb Hensarling of Texas, has promised to defund the Bureau once the new Republican House majority assumes power in January.

Other incoming House Republican leaders, including presumptive Majority Leader Eric Cantor of Virginia, and leading Financial Services Committee chair candidates Spencer Bachus of Alabama and Ed Royce of California, are expected to introduce legislation revoking the independent funding of the Bureau from the Federal Reserve which is set to begin in July, 2011. Royce has also proposed giving bank regulators the power to veto any Bureau rules.

Republican Congressmen and banking industry lobbyists are attacking the rulemaking powers of the Bureau, because President Obama is likely to veto any Republican backed legislation weakening the power of the new regulators, headed by Harvard Law Professor and consumer advocate Elizabeth Warren. Republicans believe subjection of the Bureau’s budget to the annual Congressional budgeting process will subject the Bureau’s exercise of its rulemaking powers to increased political pressure from a Republican dominated House, where appropriation measures must originate.

Europe’s Failures Jeopardize Illinois Carbon Capture Project

Reversals of fortune as far away as Finland could jeopardize the future of Illinois’ FutureGen 2.0 project, to which the Obama administration pledged $1 billion in stimulus funds as recently as last August. FutureGen 2.0 began as planned construction of a ground up new 275 megawatt clean coal power generation facility in Mattoon, under the Bush administration. When the estimated price tag for the coal gasification plant of $950 million more than doubled as construction estimates were finalized, FutureGen 2.0 was revised to revamping Ameren Corporation’s 200 megawatt Meredosia coal fired power facility with advanced combustion techniques, a new boiler, and an air separation unit to capture 90% of the carbon dioxide emissions.

Babcock & Wilcox and a group of energy companies proposed a network of pipelines to deliver the sequestered carbon dioxide to a repository in Mattoon, where it would be stored underground, along with emissions from other plants in the region should the commercial scale carbon capture technology prove successful. Now, the failure of two proposed European commercial scale carbon capture power plant projects suggests the Meredosia project may never come off the drawing boards.

Finland’s Fortum Oyj and its partner Teollisuuden Voima Oyj have both backed out of a proposed 565 megawatt carbon capture project at Meri Pori, Finland, because they say the project presents too many technological and financial risks. Also this month, Royal Dutch Shell dropped a proposal for piping carbon dioxide emissions from its Rotterdam area Pernis refinery to a proposed underground storage facility beneath the small village of Barendrecht in The Netherlands. Citing three years of delays and “the complete lack of local support,” Dutch Minister of Economic Affairs Maxime Verhagen announced scrapping of the Barendrecht carbon capture and storage facility.

Last month, Germany’s energy giant E.ON announced it was terminating development plans for carbon capture and sequestration on a commercial scale at its billion and a half megawatt coal fired power plant in Kingsnorth, U.K.

The fact that European technology leaders in industry and government in Finland, Germany, England, and The Netherlands are concluding in rapid succession during the design phase that commercial scale carbon capture and sequestration is not economically viable, combined with Illinois’ own experience of projected cost overruns totaling more than 100% on the original version of FutureGen 2.0, could eventually scotch the Meredosia/Mattoon project, despite political support in both Springfield and Washington, D.C.

Tuesday, November 9, 2010

Gradual Fuel Tax Hike Proposed

Mindful of the burgeoning federal deficit, yet equally mindful that the federal Highway Trust Fund reauthorization legislation is mired in the House, and finally mindful that infrastructure construction projects will keep folks working as long as funding is in place, Republican Senator George Voinovich of Ohio and Democratic Senator Tom Carper of Delaware have proposed to the Obama administration debt commission that motor fuel taxes be gradually increased one penny every month for the next 25 months. Touted as a debt reducing and jobs creating measure, the proposal would go a long way towards funding the needed $500 billion, six year Highway Trust Fund reauthorization. If the lame duck Congress can get the measure through both houses before the anti-infrastructure Republican majority takes over next year, it could help save the heavy construction sector from the complete disaster that awaits if Congress elects to depend on year by year reauthorization measures that choke long term infrastructure planning by state and local governments which depend on the Highway Trust Fund for 75% of the money they spend each year.

So far, this is the only practical funding increase suggestion to come out of a Congress already deadlocked over the reauthorization legislation so important to keeping our roads, bridges, waterways and drinking water systems in good repair over the long term. As it is, state and local governments will be hard pressed to come up with their 25% matching contribution to keep infrastructure projects moving forward during the near future.

U. S. Northeast Sees Construction Investment Launches

Delaware, New Jersey, New York and Pennsylvania are looking forward to fourth quarter launches of planned major construction projects with a total investment value of over $2.3 billion. Leading the way are the industrial manufacturing and biotech-pharmaceutical sectors of the economy, with 25 biotech or drug making projects worth $572 million, and 17 industrial manufacturing projects worth $715 million.

Examples include the $175 million Fisker Automotive renovation and expansion of the former GM plant in Wilmington, Delaware, to produce plug in hybrid cars, mostly for export. The completed 3.2 million square foot facility is expected to go into production in 2012, and to be making up to 100,000 cars and trucks a year by 2014. One of the big biotech projects will be expansion of the Cornell University Department of Food Science Stocking Hall laboratory to a 145,000 square foot facility at an investment of $105 million under the construction management of Gilbane Building Company. Construction of the Stocking Hall expansion at Cornell is expected to take four years.

Husky Energy Moves Forward on Diesel Desulfurization

Calgary based Husky Energy Inc. plans a diesel hydrogen treatment facility with capacity to produce 25,000 barrels per day of low sulfur diesel fuel, with construction to begin in 2013. Approval for construction is expected in 2012, with selection of an engineering, procurement and construction contractor the same year. Husky is a refiner, marketer and distributor of gasoline, diesel fuel, asphalt, ethanol, and aviation and specialty fuels in Canada and the U.S.

Saturday, November 6, 2010

Alternative Energy Policy Vacuum Takes Its Toll

The lack of a comprehensive national policy for alternative energy sources and alternative fuels continues to take its toll on the industry, and with Republican control of the House of Representatives, we can only look for more such disasters. On Wednesday, November 10, a brand new, 90% complete facility designed to annually produce 20 million gallons of fuel ethanol and 3.2 megawatts of electric power will go under the auctioneer’s gavel in Heyburn, Idaho. Owner of the new plant, Renova Energy of Idaho, LLC, filed chapter 11 bankruptcy last year, after halting construction, with the factory more than 90% complete, in 2008. Construction started in 2007.

The facility will be sold as is and in place, or if that does not succeed, equipment and structures will be auctioned off piece by piece. Renova’s plant would have been only the second ethanol facility in the State of Idaho. With very little prospect of Congressional action on national energy policy legislation any time soon, given the outcome of this week’s elections, it seems unlikely a buyer willing to complete construction and put the Renova factory into operation will come forward.

Friday, November 5, 2010

Stimulus High Speed Rail Curtailed

The first fallout of the election returns came down in Wisconsin today, with the announcement by the outgoing Democratic Doyle administration that design and engineering work on the $810 million stimulus funded Milwaukee to Madison high speed rail construction project will be suspended, pending a determination by the incoming Republican Walker administration. Wisconsin Transportation Secretary Frank Busalacchi says the stoppage is temporary, but governor elect Walker campaigned against high speed rail as a waste of taxpayer money.

Permanent cancellation of the extension of high speed rail from Milwaukee to Madison would imperil jobs at the Milwaukee plant of Spanish based Talgo, Inc, which was slated to manufacture new rolling stock for the Madison branch, where the intent was to increase train speed from the current 79 mph up to 110 mph along the route.

Additionally, Ohio governor-elect John Kasich has also reiterated his opposition to development of a high speed rail corridor in that state connecting Cincinnati, Columbus and Cleveland. It seems the $8 billion in federal dollars allocated to high speed rail construction in the stimulus package may never get spent after all.

The New Republican Agenda

According to Republican Representatives heading back to Washington, D.C. after the election recess, their emphasis in Congress will be on job creation and economic recovery. Their first priority – making the Bush tax cute permanent. They expect Obama and the Democrats to cave in to this legislation. Ohio’s John Boehner, expected to be elected speaker once the lame duck Congress comes to a close, announced in a Wall Street Journal piece today that the next Speaker should take four immediate steps to restore voter confidence in the federal government: 1) no more earmarks for favorite projects in appropriations legislation; 2) no floor votes on legislation that has not been available on line to the public for at least three days; 3) no more unfocused, thousand page bills with spending priorities and policy changes buried in incomprehensible bureaucratic text; and 4) no more secret drafting of legislation in the Speaker’s office rather than through the open committee hearing process.

Call me a cynic, but I expect if Boehner is elected speaker, his adherence to these four principals will last just until the first House Bill in the new congress comes to the floor for a vote. I hope he proves me wrong.

Wednesday, November 3, 2010

Unfinished Business In Congress

The Republican sweep to power in the House virtually assures that the unfinished business on the Obama administration agenda will not be finished any time soon. Most important to the construction industry is reauthorization of the federal highway trust fund, which Congress could not accomplish while both houses were under Democrat control. Now, unless the lame ducks get their tails in gear and pass a six year $500 billion reauthorization before Republicans take over in the House, it seems unlikely that anything good will come out of the next Congress for the construction industry.

Other construction related legislation likely to languish under Republican House leadership includes the Clean Energy and Security Act – also known as cap and trade, a public option for health insurance, the DREAM comprehensive immigration reform bill, and two bills designed to redirect unused TARP funds to infrastructure building: the Jobs for Main Street Act and the Small Business and Infrastructure Jobs Act. Any second infusion of federal stimulus dollars into the construction industry seems completely imaginary now.

Low Carbon Energy Technologies In Peril

New Chinese restrictions on export of rare earth metals threatens the development of low carbon energy technologies to commercial scale in the United States, according to Senator Edward Markey of Massachusetts, who is asking for the Obama administration to take action against the proposed 30% reduction in Chinese rare earth export limits. China is the largest supplier of the exotic metal elements used in solar cell power generation technology, as well as in computer chips for commercial and defense applications.

FTC Issues New Green Marketing Rules

Cracking down on misleading claims of environmental friendliness in marketing materials for numerous products and technologies, the Federal Trade Commission has issued new rules respecting the use of terms like “degradable” and “carbon offset” in advertising materials and on product packaging. Proponents of claims that products are “environmentally friendly” will be expected to produce competent and reliable scientific studies backing up their claims. Use of misleading certifications and seals of approval could subject advertisers to penalties. The guidelines discourage use of ambiguous phrases like “renewable materials” or “renewable energy” in favor of specific information about the materials and energy sources used in product manufacturing.

Nypro Bucking The Trend

Nypro Incorporated is expected to seek trade subcontract bids for construction of an 80,000 square foot addition to its existing Asheville, North Carolina plastic molding facility, with construction to begin this December and to be completed next summer. The addition will create 156 new jobs once the production line is activated. Samet Corporation of Greensboro N.C. is the design/build contractor for the project. Nypro has 16,000 employees at plants in 15 countries, producing plastic moldings for Dell, Nokia, Procter & Gamble, and other customers.

Feds Moving Ahead With Women Owned Set Asides

The SBA is implementing websites for self certification of women owned businesses, which could begin receiving federal government business in the first quarter of 2011, if they complete the certification process now. The set aside program will go into effect under new rules beginning February 4, 2011. Seminars are already being offered on implementation of the Women’s Contracting Rule.

India Orders From GE

GE Energy has received a three quarter billion dollar order for steam powered generators as well as gas fired turbines to be delivered before March 2012. The equipment will be installed in $2.3 billion expansion of a Reliance Power plant in Andhra Pradesh.

Northeast Biodiesel Builds For The Future

Looking ahead, and seeking a jump on its competitors, Northeast Biodiesel LLC of Greenfield, Massachusetts, has finished site preparation at its new waste grease biodiesel production plant in Greenfield, and is set to begin pouring the foundations for its 6,600 square foot plant. President Larry Union said, “I know we’re going against the grain right now, given the state of the industry without the producer tax credit.” The two phase project will install a 1.75 million gallon production train immediately, with an additional 1.75 million gallons of production capacity available when market conditions improve. Phase one should be complete by February 2011, and phase two by the end of 2012.