Friday, February 24, 2012

U S House Moving Towards Senate Version of Highway Bill

Now that substantially different legislative measures for long term surface transportation funding have gone to the floors of both the House and the Senate, work on the bills is stalled while House Republican leaders noodle over ways to cut back both the duration and generosity of their funding measure to bring it more into line with the Senate version. Facing a March 31, 2012 expiration date for current Highway Trust Fund appropriations, along with a Congressional Budget Office estimate that the proposed House measure would bankrupt the trust fund sometime in fiscal 2016, Congressmen and their leaders are attempting to cobble together a passable measure with zero earmarks which would avoid addressing the problem of declining motor fuel tax revenues until after the November elections.

The last long term Highway Trust Fund reauthorization expired in 2009, and included more than 6,300 House and Senate earmarks for the pet projects of our elected officials. Meanwhile the Senate measure has been sidetracked by votes on proposed amendments unrelated to surface transportation, which have been attached by Senators viewing the highway legislation as one of the few bills likely to pass before elections roll around.  All of this political posturing bodes further ill for the construction industry across the nation.

Chicago Clean Power Ordinance Threatens Coal Fired Power Shutdown

Chicago’s new Mayor Rahm Emmanuel, 12th Ward Alderman George Cardenas and 25th Ward Alderman Danny Solis have given Edison subsidiary Midwest Generation a two week ultimatum to come up with an air pollution reduction plan for the company’s Fisk coal fired power plant in the Pilsen neighborhood on the near west side, and its Crawford coal fired plant in the Little Village neighborhood on the southwest side, or the politicians threaten to push through the proposed Chicago Clean Power Ordinance, which if passed will require closure of both power plants within two years.  Both plants, grandfathered out of the federal Clean Air Act, burn strip mined coal brought into Illinois by rail from Wyoming, and contribute mightily to air pollution in two of Chicago’s predominantly Hispanic neighborhoods.

A deal to shut down the two facilities in exchange for a long term wind power contract between an Edison company and the City of Chicago was scuttled last fall by Illinois House Speaker Mike Madigan, and ongoing negotiations concerning the fate of the plants have apparently stalled.

Asian Carp Could Mean Construction Bonanza

The Great Lakes Commission and the Great Lakes and St. Lawrence Cities Initiative have released a million dollar study by Omaha based HDR, Inc. of methods for physically blocking the spread of predatory Asian Carp into Lake Michigan through the Chicago Area Waterway System. The study proposes three different options for physical obstruction of carp migration through the water system originally built to keep raw Chicago River sewage out of Lake Michigan.

The options all involve sheet pilings and impermeable land bridges within the navigable waterways, with the two more expensive options including intermodal cargo transfers and recreational boat lifts to maintain navigability. Costs of the various construction projects are predicted to range from $3.3 billion up to $9.5 billion, with a time line of 10 years before breaking ground, and completion in 2029.  The Army Corps of Engineers is also studying the Asian Carp problem, and in a letter to Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy, 31 Congressmen and Senators have asked her to include the HDR study in the Corps project to speed up the fish barrier.

Feds Attack Window Energy Saving Claims

Five replacement window vendors have agreed to a settlement with the Federal Trade Commission to stop making exaggerated and unsupported claims about the energy efficiency of replacement windows. Long Fence and Home of Maryland, Serious Energy of California, THV Holdings of Kentucky, and Gorell Enterprises and Winchester Industries, both of Pennsylvania, were accused by the FTC of inability to back up their claims of substantial energy bill savings for consumers who had their replacement windows installed.

While denying any wrongdoing, all five firms have agreed to future civil penalties for making energy efficiency or cost saving claims not backed up with reliable scientific data. Because the energy savings from replacement windows are dependent on unknown factors respecting each individual home, such as location and size of the building, insulation in walls and ceilings, and energy efficiency of existing windows and doors, claims of up to 50% energy savings by installation of replacement windows could not be substantiated by the settling companies.

The main point is that even if a window vendor can demonstrate that its replacement product reduces energy loss by 50% compared to a homeowner’s existing window, replacement of all the windows in the house will not likely reduce the homeowner’s energy bills by 50%, due to the other factors involved.

Tuesday, February 21, 2012

Federal Construction Budget Tradeoffs

No matter where you may believe the federal Highway Trust Fund spending level will ultimately rest on the spectrum between the House measure’s $34.6 billion annually and the Obama administration’s $79.2 billion annually, the sad fact is that these appropriations are offset by dramatic cuts to other federal construction spending programs, to the ultimate long term continuing injury to this important sector of the American economy. Obama’s own budget proposal cuts $450 million a year from transit construction funding in Illinois alone.

HR 7 takes us “back to the dark ages,” according to Transportation Secretary Ray LaHood, eliminating all funding for building bike paths, bike lanes and pedestrian safety projects. With the current Highway appropriations expiring March 31, 2012, the industry is undoubtedly looking at another series of short term extensions, making government and industry planning impossible until a long term funding measure is ultimately passed through both houses.

Meanwhile, even the comparatively generous Obama budget slashes Defense Department construction spending by 20%, Corps of Engineers civil construction projects by 13%, clean water state revolving funds by 20%, drinking water state revolving funds by 8%, Veterans Administration construction by 10%, and airport improvement grants by 28%. While the heavy civil sector of the US construction economy will feel these cuts most severely, resultant price increases in construction materials and equipment, due to the loss in sales volume, will impact all construction businesses across the country. Our national elected leadership continues to fail our industry.

Fraudulent “Disadvantaged” Businesses Taint City Set Aside Program

Three subcontractors on City of Chicago contracts worth millions of dollars have been accused in federal criminal complaints of defrauding the taxpayers by falsely claiming to have worked as certified woman owned or disadvantaaged businesses for which a percentage of work is set aside in City of Chicago contracting requirements. Perdel Contracting and Accurate Steel Installers, owned by Elizabeth Perino of Lockport and Diamond Coring, owned by Anthony Cappello of Homer Glen, are accused of submitting false invoices and purchase orders in support of minority and disadvantaged business set aside requirements on City of Chicago contracts with major Chicago area construction businesses.

In addition to evidencing how deeply political corruption runs through Chicago and Illinois public contracting, these criminal informations, unsealed last week, demonstrate that the laudable policy goal of making the American construction industry more minority and gender inclusive is often corrupted in the execution, to the considerable disadvantage of both the public and those honest business owners who go to the trouble of obtaining proper minority or woman owned, and disadvantaged business certifications from government agencies, and then submit genuine bids to general contractors to work on federal, state and local government projects.

Congress Torpedoes Wind Energy Industry

Without so much as a whimper, Congress has torpedoed the future of the wind energy industry in the United States, by failing to include extension of the $0.022/killowatt hour wind electricity income tax credit in the legislation passed by both houses February 16, whichPresident Obama is expected to sign into law later this week, extending payroll tax cuts and unemployment benefits for millions of Americans. While tand alone legislation to extend the wind power credit is theoretically possible later in this session, a delayed passage of the measure would not likely save the wind farm projects on the drawing boards for 2013, or the manufacturing jobs producing the towers and turbines needed to build those wind farms.

Kevin Borgia, head of the Illinois Wind Energy Coalition, predicts that without the tax credit, the wind ppower market will grind to a halt. Paul Bowman, vice president of development for EON Climate and Renewables North America, says $1 billion of future projects his company has in planning are now in jeopardy because the tax credit has not been extended. Bowman says a year end measure extending the tax credit will come to late to save those plans. Turbine manufacturers and development companies are already laying off employees in anticipation of declining markets after the end of this calendar year.

Navigant Consulting predicts a loss of 37,000 American wind industry jobs within a year as a result of the legislative delays. Terry Royer, CEO of Winergy, a wind turbine gear box maker, with 90% of its sales in the US market, says the company is already planning layoffs. In Illinois alone, 15 wind energy developments aggregating 3.2 million megawatts, which have already been permitted are at risk of termination because of Congressional inaction.

Monday, February 13, 2012

Highway Trust Fund Puzzle – The Third Piece

The third piece of the federal Highway Trust Fund reauthorization puzzle fell into place this morning with the release of the Obama Administration’s 256 page fiscal 2013 budget message. The White House is asking Congress for a six year, $476 billion reauthorization of the Highway Trust Fund, including spending from motor fuel taxes and general federal revenues, all marked as mandatory expenditures.

This amounts to annual expenditures averaging more than $79.3 billion for each of the next six years, an appropriation level over 229% greater than HR 7 and more than 190% greter than SB 1813, the two measures currently pending on the floors of Congress. The Administration’s release of this proposal on the heels of the miserly bills reported out of Congressional committees last week will undoubtedly serve to prolong the battle over reauthorization legislation, and lead to several more interim, month to month appropriation measures.

Each step in this process demonstrates how little the Washington DC politicians care about the devastating impact their behavior has on state and local government planning, and on employment in the construction industry. While they are busy posturing, blaming each other for reckless overspending or terrifying gridlock, tradespeople across the nation remain out of work, and contractors struggle to stay in business. The lack of leadership on both sides of the aisle and both ends of Pennsylvania Avenue is appalling. If you care at all about the future of the construction economy, get out a pen, some company letterhead, three envelopes and three stamps, and let your Representative and both Senators know how you feel.

Friday, February 10, 2012

Highway Trust Fund Battle Lines Reemerge – More Potholes On The Way

Shortly after his first State of the Union message, President Obama proposed a $550 billion six year reauthorization of the federal Highway Trust Fund. It didn’t pass Congress. Many industry experts labeled that proposal as woefully inadequate to meet even present infrastructure construction, repair and maintenance needs. Since then infrastructure construction funding in the federal budget has been accomplished by a series of interim appropriation extensions, a few months at a time.

Earlier this week two bills emerged from Congressional committees which would provide more or less long term appropriations for the Highway Trust Fund, though at levels far beneath the amounts Obama initially proposed, despite the fact American infrastructure continues to fall deeper and deeeper into disrepair as state and local government budgets are strained by declining revenues and burgeoning human sustenance needs.

Chairman John Mica’s (R. Fla) House Transportation and Infrastructure Committee reported out the 847 page HR 7, dubbed the American Energy and Infrastructure Jobs Act of 2012, which includes appropriations of $138.5 billion for the Highway Trust Fund over the next for years or about $34.6 billion each year: a mere 37.8% of the amount President Obama couldn’t get through a Democratic Congress. Chairman Max Baucus’ (D. Mont.) Senate Finance Committee reported out the 632 page SB 1813, entitled the Highway Investment, Job Creation and Economic Growth Act of 2012,  which includes appropriations totalling $83.3 billion over only the next 2 years, or about $41.6 billion each year, a somewhat more ambitious 45.4% of President Obama’s initial annual request.

Both pieces of legislation are peppered with various anti-pork and anti-earmark provisions, which could well steal the spotlight from the awesome decreases in spending levels. Conservative think tanks are already assaulting the meagre provisions of funds for hiking trails, bicycle paths and scenic preservation construction – work often subbed out to minority and woman owned small businesses to meet the 10% small business set aside requirements in both measures. This is less an assault on highway beautification than it is an attack on minority and women construction business set asides. These public opinion campaigns, couched as “living within our means” policy, are in reality ambushes laid against the progress in the construction industry which public funding set asides have enabled women and minority owned businesses to achieve.

Whatever the ultimate conference committee version of Highway Trust Fund reauthorization may look like, I predict it will be a long time coming, and be woefully underfunded. Meanwhile, with the wintertime freeze/thaw cycle in full swing, we will be seeing more and more potholes on our streets and highways while Congress endlessly debates these measures.