Is Chicago Area Construction Recovering?

Maybe. A little bit.

The Chicago and northeastern Illinois area had 14 of the top 35 construction starts in the Midwest in 2011, totaling nearly two billion dollars. The top 35 starts were in Illinois, with 14, Indiana, Missouri, Ohio and Wisconsin. The Chicago area top starts include 5 residential projects totaling $616 million dollars, 4 higher education projects totaling $457 million, two health care projects totaling $319 million, one infrastructure project at $300 million, and two industrial projects totaling $290 million, for a grand total of $1.982 billion in very major new construction jobs breaking ground before year’s end.

These top projects were garnered by contractors with household names in the region, including McHugh with 3 projects, W. E. O’Neil with 2, Benesch, Pepper, Lend Lease and Power with one each, and five less well known builders grabbing the rest of the work. Two of the higher education projects are at the University of Illinois, one at the University of Chicago, and one at DePaul University in Chicago. The new hospital construction is located in suburban Oak Lawn and Hoffman Estates, and the infrastructure project is phase 2 of the Wacker Drive reconstruction in Chicago’s loop, which no one driving or walking in the downtown area could possibly miss.

Add to these projects the $7 billion in Chicago Infrastructure Trust projects estimated yesterday by Mayor Emmanuel in a speech at the West Side Laborers’ Union Hall, and you have some significant employment for skilled tradespeople in the northeastern Illinois area. While still awaiting City Council approval, the Chicago Infrastructure Trust already has one project on the drawing boards – energy efficiency improvements to existing City of Chicago buildings – and includes acceleration of construction of two runways at O’Hare International Airport, all to be paid for by City cost savings or user fees – no new taxes on Chicago’s citizens. Mayor Emmanuel also mentioned repair of many miles of aging City water mains, and construction of new parks and schools, without any specifics as to locations or how the projects will be funded by the trust.

Mayor Emmanuel predicted in his speech that the Chicago Infrastructure Trust projects should create 30,000 jobs in the coming years. Add that $7 billion in construction spending to the nearly $2 billion already underway, and you have the beginnings of some sort of construction recovery.

Congress Slaps Another Band Aid On The Hemorrhaging Highway Trust Fund

In a shameless round of what has become typical Congressional backbiting and last minute gamesmanship with the futures of millions of our citizens, both the House and the Senate yesterday passed a three month extension of the Highway Trust Fund, mostly along party lines, and just two days before authority to collect and spend the federal motor fuel tax would have expired. The move, coming only hours before the House adjourned for two weeks, preserved the ability of the federal government to continue collecting $110 million a day in motor fuel taxes.

However, while the elected representatives in Washington, D.C., tout the measure as preserving 1.8 million construction industry jobs on infrastructure projects, that outcome is much less than clear. Projects already underway, it is true, will get continued funding for another 91 days, but the uncertainty about how much money might be available to state and local governments for projects which they planned to bid out next month could result in withdrawal of bid packages slated for release this spring, pushing many of those projects back a whole year due to the delay in passage of long term reauthorization legislation.

The Senate has already passed a two year, $109 billion reauthorization measure, but the more ambitious House version, a four year, $138.5 billion measure, fell apart amid strong tea party opposition. This much uncertainty about the level of federal funding for infrastructure construction after July 1, 2012, could lead Chicago and Illinois to delay bidding on CTA rehabilitation projects and IDOT’s annual construction program, slated for release to bidders in June. Congressional heedlessness to the summer highway construction season north of the Mason-Dixon line at this late date is simply unforgivable.

Speaker Boehner Bemoans Lack Of Earmarks To “Grease” Highway Bill

House Tea Party freshman who want to get the federal government completely out of the business of funding surface transportation construction and repair are making it impossible for Speaker Boehner to muster enough votes for passage of the Senate’s bipartisan two year, $109 billion reauthorization bill for the federal Highway Trust Fund. Bemoaning his inability to push more than a temporary three month extension through the House, Boehner told a reporter “When it comes to things like the highway bill, which used to be very bipartisan, you have to understand it was greased to be bipartisan with 6,371 earmarks. You take the earmarks away and guess what? All of a sudden people are beginning to look at the real policy behind it.”

With as many as 1.8 million transportation construction and repair jobs at risk March 31, 2012, when the current short term funding bill expires, Senate Majority Leader Harry Reid said as recently as Thursday he is “not inclined” to go along with any House passed short term extension measure: “Over in a big, dark hole we now refer to as the tea party dominated House of Representatives … they destroyed their own bill, and now they won’t agree to take up our bill. House Republicans are going to have to feel the heat of the America people.”

This lack of leadership on both sides of the aisles in both houses of Congress is simply astonishing. For our elected leaders to be playing chicken with the employment of nearly two million citizens while there are only four days left for action is inexcusable. Hasn’t Congressional fooling around with the construction sector of the American economy gone far enough already?

Campaign Contributions Push Doubtful High Speed Rail Project Forward

Anthony Marnell II donated at least $15,000.00 to various campaign committees for Senate Majority Leader Harry Reid. Gary Tharaldson donated $10,000.00 to Reid’s campaign. Sig Rogich is co-chairman of Republicans for Reid.  What do these three gentlemen have in common?

Marnell and his son Anthony Marnell III, along with Tharaldson, are investors in privately held DesertXpress, a company which has so far spent $270,000.00 lobbying for a $4.9 billion federal government loan to build a high speed rail line from Victorville, California to the Las Vegas casino strip. Rogich is a consultant to DesertXpress. Private investors expect to put up only $1.6 billion in capital towards the $6.5 billion cost of construction and rolling stock for the project.

Victorville, California is a small town, population about 115,000, on the edge of the Mojave Desert. Vacant stores are scattered across the downtown area. DesertXpress proposes a 15,000 car “park-and-ride” lot on a remote parcel of land between Victorville and Barstow, California, where they say Californians from throughout the Los Angeles Basin will leave their cars and hop onto a bullet train for a 200 mile, one hour and twenty minute, $75.00 luxury train trip directly to the Las Vegas Strip.  The doubters question whether California folks will drive 50 miles to embark on a 200 mile train trip rather than just mashing down on the accelerator and driving the rest of the way to Las Vegas.

Why not run the train all the way into LA? Well, once you get past Victorville, acquiring the right of way through urban southern California would make the projected $6.5 billion cost of the DesertXpress proposal look like a mere drop in the bucket. However, in order to pay back the federal government loan they are seeking, Majority Leader Reid’s buddies will have to attract at least 2.5 million train riders every year, at a fare beginning at $75.00 per trip. The odds are very good, in Las Vegas terms, that the loan would never be repaid, and American taxpayers would end up owning the unprofitable high speed rail line to nowhere.

Southern California Association of Governments Executive Director Hasan Ikhrata points out that high speed rail has never been profitable anywhere in the world to date: “When somebody comes and tells me ‘I will build a system that pays for itself,’ I’m suspicious,” Ikhrata says. “There is no high speed rail system in the world that operates without subsidies.” While Senator Reid and other supporters of the project glibly brag that their plan will produce 80,000 new jobs in the region, the Federal Railroad Administration documents show that only 722 of those jobs would be permanent.

Whatever the goal of the stimulus funding Congress passed for high speed rail in America may have been, I doubt that very many of the Congressmen and Senators who voted for that legislation were thinking of replacing airline gambling junkets from LA or Orange County to Las Vegas with a bullet train.

While Congress Dithers, The Streetcar’s The Thing

Given the reluctance of Congress as a body to pass any long term reauthorization of federal funding for public transit, and the desire of tea party Congressmen to repeal all federal money for mass transit – “let the poor folks walk” seems to be one of their popular rallying cries – most of the new urban mass transit construction going on these days is for short run streetcar lines.  Atlanta, Cincinatti, Dallas, Los Angeles, Milwaukee, Oklahoma City, Salt Lake City, and Washington D.C. are all beginning or continuing with construction of short run street car lines, at project costs ranging from $18.5 million per mile in Salt Lake to $77.0 million per mile in Los Angeles.

Why street cars? The obvious answer is that the municipalities already own the streets, and therefore right of way acquisition cost is always zero for these projects. Add the obvious lack of any requirement for elevating the tracks or tunnelling them underneath the urban landscape, and if you have to spend 100% of your own money, why, the streetcar is the way to go. While a few streetcar projects have received federal cash from the mass transit portion of the Highway Trust Fund, or from TIGER grants under the Obama stimulus legislation, many are fully funded by state and local governments. If you have a short urban commute and don’t want to drive yourself, you may soon be riding a streetcar.

What Does A Pothole In A River Look Like?

You can’t see it, but it’s REALLY big!

Most of the debate surrounding the Highway Trust Fund legislation swirling around and around the Capitol in Washington, D.C., centers on potholes in our nation’s roads and bridges, and the cost of repairing them. However, one part of the construction funded by these legislative initiatives is for other surface transportation – railroads and waterways. Waterways, in particular, continue to be the poor stepchild of surface transportation funding.

Water commerce is the quietest and most hidden aspect of the transportation of goods across our country, nearly invisible to citizens who don’t work the tugs and barges that move 550 million tons of coal, grain, refined petroleum products and other goods annually up and down the rivers of our huge nation. Navigability of the nation’s waterways is kept open by means of more than 200 locks and dams built, maintained and operated by the U. S. Army Corps of Engineers. And, while a pothole in the highway can be driven around by a lane change and travel of only several hundred feet out of a truck’s chosen route, shutting down a single river lock can put hundreds of thousands of tons of cargo on the roads or rails to travel many hundreds of miles out of the way, at a considerable additional cost in both dollars and time.

Rather than funding lock and dam construction and repairs by appropriating sufficient funds to complete approved projects once they are begun, Congress parcels out money to the Corps of Engineers a year at a time, and there is never enough to pay for the work already started, much less badly needed projects on the drawing boards. The result is that each job ends up costing a lot more than originally estimated, because work crews are repeatedly mobilized and demobilized, and materials are bought in small batches a year at a time, at annually increasing prices. Numbers tell the tale: Congress spends only about $170 million annually on lock and dam construction and repairs, against the immediate need for $8 billion of work. At that rate the required projects will be completed in 47 years if prices never go up. The designed useful life of a lock and dam project is 50 years. Do the math.

Take a single example: there are 23 locks and dams on the Ohio River between Pittsburgh and Cairo, where it flows into the Mississippi. About 90 million tons of cargo moves up and down this stretch of water each year. In order to open up a choke point near the confluence of the Ohio and Mississippi, the Corps of Engineers proposed, and in 1988 Congress approved, construction of a dam and two new locks at Olmsted, Illinois. At the time the projected cost of construction was $775 million. However, due to intermittent and piecemeal funding, the cost will probably be more like $3.1 billion when the job is finished in about 2024.

Meanwhile, every air conditioning season, electric power utilities up and down this stretch of river pray that the 13 million tons of coal delivered to them by water every year aren’t diverted by failure of one or more of the 80 year old smaller locks Olmsted is slated to replace.  Since over 76% of their coal is delivered on river barges, these power plants would have to raise rates and face brownouts if required to pay more to ship the fuel by road and rail, and suffer the attendant delivery delays.

Meanwhile, other badly needed lock and dam repair projects see their funding sucked dry by the escalating needs of the Olmsted job. Shippers and barge lines have offered to have the diesel fuel tax they pay to the federal government increased to $0.29 per gallon, to pay for more of the work sooner, but Congress continues to refuse any and all tax increases – even those taxpayers beg for – because it would have to match the increased tax revenue dollar for dollar out of general revenues under current Trust Fund formulas, and the bill would never get through the “no new taxes” House.

So, the next time you want to see what a pothole in a river looks like, take a drive down to Olmsted and sneak a peek at an unfinished lock and dam construction project.

U S Supreme Court Rules USEPA Wetlands Compliance Orders Can Be Judicially Reviewed

March 22, 2012, the U. S. Supreme Court ruled against the contention of USEPA that the agency’s wetlands compliance orders are not subject to judicial review. The Court ruled in favor of Priest Lake, Idaho homeowners Mike and Chantell Sackett, who had sought a court review of USEPA orders that the Sacketts remove developments and restore wetlands on property they had purchased, or else pay up to $37,500 per day in fines to the agency. In a unanimous opinion Justice Scalia wrote for the court that “There is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review – even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.”

This decision will give homeowners, along with other property owners and developers, the right to go to court to challenge EPA determinations that property is all or part protected wetland, and therefore not subject to development. As a result of the ruling, the existence or non-existence of wetlands on a property parcel will now be settled by the courts once and for all, making development possible if the courts rule against EPA, without fear of fines against the developer.

President Obama Reverses Himself on $2.3 Billion Keystone Pipeline Fast Tracking

Bowing to pressure from Republican presidential candidates’ campaign rhetoric respecting the price of motor fuel at the pump, President Obama will officially announce tomorrow that he is issuing an executive order directing federal agencies to “fast track” permitting for pipelines that alleviate “choke points,” including the 485 mile, $2.3 billion segment of the Keystone XL pipeline from Chushing, Oklahoma to the Texas gulf coast. The decision will reverse the policy of the Obama administration announced last January, when the president refused to accelerate the Keystone XL permitting process.

TransCanada expects to complete the Oklahoma to Texas segment of Keystone XL within a year from final permit approval. Whether either approval of the pipeline or completion of its construction will actually reduce gasoline prices at the pump remains to be seen.

DOJ Belatedly Settles Egyptian Sewer Project Bid Rigging Case

Five defunct  construction firms that built an Egyptian sewer system for USAID in the late 1980’s and early 1990’s have agreed to repay taxpayers $47 million in excessive costs caused by bid rigging on the project. The False Claims Act case alleges that Harbert Corporation, Harbert International, Inc., Bill Harbert International Constructions, Inc., Harbert Construction Services Ltd. (UK) and Bilhar International Establishment conspired with potential bidders for competitors to bid artificially high, or not to bid at all, allowing Harbert and its allies to get an above market price on the project. The Harbert companies allegedly paid off the losing bidders for their cooperation in the scheme.

Senate Highway Trust Fund Bill Scrapped By House Leadership

House Transportation and Infrastructure Committee Chairman John Mica announced today, March 22, 2012, that he plans to introduce the ninth short term extension measure for the federal Highway Trust Fund, rather than bringing the Senate’s two year long term reauthorization measure to the House floor. Mica says his bill will only authorize continued funding and motor fuel tax collections through June 30, 2012.

The two year, $109 billion Senate legislation has been urged on House leadership by its sponsor Barbara Boxer of California, by Senator Charles Schumer of New York, and by Obama’s Transportation Secretary Ray LaHood. Schumer characterized the repeated short term Congressional extension measures as “a very bad idea … it’s a death of a thousand cuts.”  The Senate measure was passed by a bipartisan 74-22 vote, so it seems election year gridlock and political party rhetoric remain more important to House Republicans than leadership and policy solutions.

Illinois Tollway TriLevel Bridge Resurfacing Cuts Project Time And Budget, Adding Motoring Headaches

The Illinois Toll Highway Authority will spend $13 million and the next four months resurfacing the trilevel bridge connecting I-294 with I-90 near Chicago’s O’Hare Airport. By closing all lanes to traffic at the same time the project will take four months instead of seven months, and will relaize cost savings by using a single pour to resurface all lanes of the bridge, which has not been entirely replace since it was first built in 1958.

Construction complications on the project include FAA height restrictions on the equipment contractors can use on the job, due to proximity to O’Hare departure and approach pathways, as well as a lengthy detour taking motorists through two toll plazas. The Tollway promises to collect only a single toll along the detour route, though.

Renewable Energy Construction – Will Bureaucrat’s Romance Sidetrack Federal Policy Initiatives?

Steve Black, Counselor to the Secretary at the U. S. Department of The Interior, and chief architect of the Obama administration’s alternative energy policy initiatives, has been ordered by the department’s ethics office to recuse himself from all matters involving California wind and solar energy company NextEra, because of his romantic relationship with NextEra’s lobbyist Manal Yamout. Yamout, NextEra’s Director for Governmental and Regulatory Affairs, formerly served as special advisor for alternative energy to California governors Arnold Schwartzenegger and Jerry Brown. Black leads the federal Renewable Energy Policy Group, a network of senior federal and state energy officials who make key decisions on multimillion dollar solar and wind energy projects.

It was Black himself who brought the romance to the attention of Interior Department ethics officers last fall. Black, age 51, was counsel for Interior Secretary Ken Salazar when Salazar was a Sentaor from Colorado.  Salazar brought Black over to Interior, and put him in charge of the Obama administration’s overall renewable energy planning effort, which President Obama is describing as his “all of the above” energy strategy on his two day campaign swing through Nevada, New Mexico and Oklahoma this week. The identical “all of the above” title has also been stamped onto Obama administration energy policy efforts by both Obama’s Press Secretary Jay Carney and Obama’s Chicago based campaign press official Ben LaBolt.

Conservationists working with the Interior Department on alternative energy policy initiatives have questioned Black’s ability to continue his policy leadership in light of the prohibition on involving himself in any matter affecting NextEra. Ileene Anderson, of the Center for Biological Diversity and a member of Black’s planning groups, says: “We’re looking at these large scale planning processes. It’s going to amend land management plans in perpetuity, essentially. The Interior Department needs to have someone engaged that doesn’t have ties to any company, so that they can make the best decisions to get renewable energy off the ground.”

The same sentiments were echoed by Kern County, California, planning director Lorelei Oviatt, who also works with Black in her official capacity. “I absolutely see the concern,” Oviatt says. “I think the integrity of the process is very important. Landowners and public land users sometimes think the process is not fair and equitable. Anything that raises questions about the integrity of the process is not good.”

While NextEra asserts that Yamout, its Washington D.C. lobbyist since July 2011, has not engaged in any lobbying on its behalf with the Interior Department or the State of California since she was hired, it seems a lot of folks believe that pillow talk might be one of the most effective forms of lobbying.

Production Tax Credit Expiration Jeopardizes Wind Farm Manufacturing And Construction

It begins to look like Congress will let the $0.022 per kilowatt hour Production Tax Credit for wind generated electrical power expire when the current legislation runs out December 31, 2012, and that is already putting a damper on wind farm expansion plans, dampening the economic impacts of wind farm construction work and wind generation equipment manufacturing, as big players in that sector of the construction economy contemplate major layoffs. John Graham, CEO of BP Wind Energy, which owns the 100 megawatt Flat Ridge wind farm north of Medicine Lodge, Kansas, says the tax credit is still needed to make wind energy generation price competitive with coal and natural gas fueled power.

According to Graham, the Production Tax Credit costs the government $3.5 billion annually in lost tax revenue, but produces $15 to $20 billion in investment in wind power manufacturing and construction. Matt Kaplan of Cambridge, Massachusetts based IHS Emerging Energy Research estimates the Production Tax Credit has so far produced an addidional 12 gigawatts of wind power generating capacity, or 20% more additional generating capacity than any earlier year of wind power construction. Kaplan predicts the rate of growth will fall by 85% if the Production Tax Credit is permitted by Congress to expire at the end of this year.

Kaplan’s prediction has a strong historical basis: in the years 1999, 2001 and 2003, previous times Congress has allowed the Production Tax Credit to expire, new wind power generator construction plummeted between 73% and 93% upon expiration of the tax incentive. Once the Production Tax Credit expires, the only remaining incentive for continued wind power construction is the state by state legislative mandate for utilities to buy a certain percentage of their electricity from renewable sources – a mandate that only exists in twenty nine states.

Wind power equipment maker Vestas has already threatened layoffs of 1,600 plant workers in Colorado if the tax credit is permitted to expire, and Mitsubishi Heavy Industries already scrapped plans for a $100 million manufacturing facility in Arkansas. The American Wind Energy Association predicts loss of a total of 37,000 jobs if the credit is not renewed.

House Once Again Stymies Highway Trust Fund Reauthorization

Despite hundreds of hard hatted construction workers rallying yesterday at the Mall in Washington, D.C., in favor of House passage of the Senate approved two hear Highway Trust Fund reauthorization legislation, House leaders speaking at the rally solemly predicted another short term renewal – the ninth since the last multi-year reauthorization ran out in September, 2009 – rather than passage of any long term reauthorization legislation. Senator Barbara Boxer of California, Chair of the Senate Environment and Public Works Committee, urged those attending the U. S. Chamber of Commerce sponsored rally to “Get over to the House and … tell them to pick up the Senate bill and pass it.”

On the other hand, after his speech to the crowd, House Transportation and Infrastructure Chair John Mica told reporters he was consulting with Speaker Boehner on a short term extension. “A decision will be made on the length of an extension, hopefully in the next 24 hours, and it will come up on the House floor next week,” Mica said. Seems our elected leaders are just leading us around in circles.

Housing Starts Down, Housing Permits Up: What Does It All Mean?

February housing starts dropped 1.1% from January’s level, but permits for housing construction rose 5%, according to the Department of Commerce numbers. After earlier recessions in the U. S. economy, housing construction accounted for 15% or more of economic growth. Since this recession officially ended in June 2009, housing construction has accounted for only 4% of growth in the American economy.

In today’s market, new home sales are competing with deeply depressed prices for foreclosed and short sale homes, severely restricting the historical contribution of new housing construction to economic recovery. In a healthy economy, a new home typically sells for  15% premium over a comparable existing house. Today that premium has doubled to 30%.  According to the National Association of Home Builders, each new home creates three jobs for a year, and generates $90,000 in tax revenues to various government units. Without this stimulus, our economic growth has stagnated at alarmingly low rates.

National Resources Defense Council Lawsuits Could Bring A Boom in Sewer Plant Construction

According to the National Association of Clean Water Agencies, two lawsuits filed in federal courts in New York and Louisiana could spur a $280 billion boom in sewer plant construction and renovation, if courts rule that the USEPA must regulate sewer effluent nutrient content more stringently.  NRDC challenges EPA regulations permitting each state to set numeric limits for nitrogen and phosphorous in sewer effluent, and attacks USEPA’s refusal to act on its 2007 petition requesting the addition of nutrient removal to current secondary treatment requirements under the Clean Water Act.

NRDC is asking the courts to require USEPA to issue and enforce a requirement that every sewage treatment plant in the United States use the best available technology to limit phosphorous and nitrogen in sewage effluent, in order to reduce giant sized algae blooms in the Gulf of Mexico and Chesapeake Bay.

GOP Budget Plan Draws Sharp Battle Lines

House Budget Committee Chairman Paul Ryan released the GOP budget plan yesterday, reflecting a continuation of gridlock and partisan attacks by each party on the opposition’s core constituencies.  The Obama administration budget attacks the Republican Party’s core constituency by proposing significant tax increases on the very rich, while the House plan attacks the Democratic Party’s core constituencies by proposing draconian cuts in Medicare and Medicaid and repeal of Obama’s signature health care law.

While neither plan stands any chance of getting passed into law this session, the stark contrast signals another year of government by continuing resolution without any significant tax or spending reforms. Once again, election year politics has taken precedence over any hope of legislative solutions to any of America’s many significant economic problems.

Obama Administration Pursues Uniform Infrastructure Sustainability Rating System

The Obama administration gathered construction industry and federal agency managers at a four hour closed door White House meeting March 9, 2012, to hash over ways to push some uniform sustainibility measurement standards into federal infrastructure procurement in the transportation, housing, federal office building, defense and urban development sectors. Jointly sponsored by the White House Council on Environmental Quality and the Zofnass Program for Sustainable Infrastructure, the private session was attended by federal bureaucrats from HUD, DOT, DOD, GSA, and OMB. DHS was not represented at the meeting.

Urging development of a uniform infrastructure sustainability standard siimilar to LEED for buildings, the Obama administration is pushing the Zofnass Program,  and the Institute for Sustainable Infrastructure, together with industry groups including the American Society of Civil Engineers, the American Public Works Association and the American Council of Engineering Companies to come up with standardized criteria the federal government could incorporate into infrastructure bid documents and requests for proposals on infrastructure projects.  According to Paul J. Zofnass, president of New York City based environmental consutaing firm EFCG, Inc., “We either learn to make infrastructure sustainable, or we’re toast.”

Some industry attendees at the meeting complained that federal agencies resist sustainability in procurement bidding because considering it is too difficult within the confines of a “lowest responsible bidder” statutory procurement  framework.  Michael W. Creed, CEO of North Carolina based engineering firm McKim & Creed, remarked, “Should we add ‘depletion’ costs for non-renewable resources consumed during construction projects and use that as part of a sustainability scorecard?”  Currently there are at least two competing sustainability rating systems: “Envision,” developed through the Zofnass Program and Harvard University, and the ISI’s system, developed with input from various engineering professiona societies. Leaders of development of the “Envision” system expect to publicly release a pre-planning sustainability checklist and a project sustainability economic assessment tool later this year.

While the White House effort is a laudable one, it stands little chance of adoption any time soon. In the current Congressional enviornment of cost cutting and tax reform, anything involving evaulation of sustainability soft costs in the procurement process is likely to meet political put downs as “funny math” or “another bridge to nowhere.”

“Budget Scrubbing” Produces $2 Billion In Additional Texas Road Funds

In announcements puzzling Texas legislators, TDOT Chief Financial Officer James M. Bass says the agency has identified an additional $2 billion it can devote to major highway projects like expansion of Interstates 35W in Fort Worth and 35E in Dallas and Denton Counties. State Representative Joe Pickett of El Paso responded to the recalculation this way: “It sounds strange to me. I’d like to ask them where they’ve been printing money.”

According to Texas Transportation Commission member Bill Meadows of Fort Worth, “you effectively earn $2 billion by scrubbiung the existing system and managing the budget carefully.” TDOT officials say they had underestimated federal Highway Trust Fund contributions to be received by $750 million, overestimated current project costs by $650 million, and left untapped $600 million of borrowing power in the Texas Mobility Fund. Pickett’s reply: “They should be able to forecast better.”

Can The Nationwide Foreclosure Settlement Help The Construction Industry?

Unfortunately, probably not. Government officials filed papers Monday, March 12 asking the federal court supervising the litigation to approve a $26 billion settlement worked out between Bank of America, JP Morgan Chase, Wells Fargo, Ally Financial and Citigroup on the one side, and forty nine state governments on the other side. Oklahoma, the 50^th state, made a separate deal. More banks are expecte to join in the settlement terms if the court approves them.

Documents supporting approval of the settlement include employee reviews at Bank of America reflecting company requirements for employees processing foreclosure paperwork to process 49 affidavits per hour, and 51 mortgage assignments per hour. That means reviewing, correcting and signing almost one court document per minute. A review of chase paperwork reflected that only 12% of foreclosure filings actually documented the amount allegedly owed by the homeowner, and only about 3% of the foreclosure complaaints were accurate in respect of the amount claimed to be owed. A Wells Fargo E-mail told employees to expect 100 affidavits delivered at 9 a.m., and they must all be signed by noon the same day. This would mean reviewing and signing the documents at the rate of one every two minutes without a break of any sort for three hours.

One employee at Ally signed up to 10,000 affidavits in support of foreclosure litigation each month – or a rate of one every 64 seconds during an 8 hour work day, with no time for breaks.

Of the $26 billion, $2.5 billion will go to state governments, including Wisconsin and Missouri, which have already announced their intention to divert settlement funds for reduction of general state budget shortfalls rather than using them to help struggling hoimeowners to avoid foreclosures. Three quarters of a million homeowners who already lost their houses in foreclosures will receive about $2,000 each in compensation – accounting for the next $1.5 billion. Up to $17 billion will go toward reduction of mortgage balances on homes which are underwater in today’s depressed real property market. Another large chunk will pay more than $100,000.00 each to active duty military servicemen and women whose homes were foreclosed in violation of the Soldiers and Sailors Civil Relief Act.

Even the state officials who negotiated the deal acknowledge that it won’t do much to relieve the glut of foreclosed homes depressing the housing market, because the total depth of the underwater housing phenomenon could reach a staggering $750 billion. Even if the number of participating banks increases to the anticipated total of 14, and the value of the settlement goes up to the predicted level of $30 billion, it’s just a 4% drop in the bucket.

It could take years for the residential real property market to clear the inventory of foreclosed and to be foreclosed houses, so new home construction might resume some semblance of its former healthy pace.

Senate Passes Highway Trust Fund Reauthorization Measure

Late Wednesday morning, March 14, 2012, the Senate voted 74-22 to pass a two year, $109 billion Highway Trust Fund reauthorization bill, just a mere 17 days before the taxing and spending authority for federal surface transportation programs runs out on March 31, 2012. The spending level, according to Transportation Secretary Ray LaHood, a former congressman, is far below the level needed to maintain America’s surface transportation facilities and expand them to meet the needs of population growth. In his remarks, LaHood described federally funded highways as “one big pothole.”

Under the Senate measure, programs for construction of bicycle paths, hiking trails, safe routes to schools, and rails to trails construction will now have to compete for funding for other so called “congestion mitigation” projects. The bill also includes toughened safety requirements for the long distance and tour bus industries, which together transport aoughly the same number of passengers annually as the nation’s airline industry. The legislation also includes a tenfold increase, to $1 billion, for funding of the credit assistance program designed to leverage private investment in revenue generating transportation projects. Past estimates show this program can generate as much as $30 in private capital for every dollar of government participation.

The ball is now in the court of House Speaker John Boehner of Ohio, whos own chamber’s larger version of a Highway Trust Fund reauthorization measure fell apart earlier this session. It remains to be seen whether the Senate legislation, which does not address the long term solvency of the Highway Trust Fund, will fare in the House. Senate passage was completed only after competing Senate amendments, one to prohibit new tolls on existing interstates, and one to expressly permit states to impose new tolls on existing interstates, were both withdrawn. With the House in recess until next week, the suspense lingers.

Can The Construction Industry Absorb Capital Intensive Fabricator Failures?

The recent defaults and plant shut downs by curtain wall fabricators Trainor Glass of Farmers Branch, Texas on February 22, 2012, and ASI Ltd. of Whitestown, Indiana, just before last Christmas, raise the question whether fabricators and suppliers of cladding, structural steel, precast concrete and various piping products, all of whom have relatively large capital investments in plant and equipment, can survive in this market of shrinking orders for their products on major construction projects.

While a performance and payment bond surety may step forward to keep production flowing for a time, as apparently happened in the case of ASI Ltd’s. subcontract  for cladding on the Brooklyn, N.Y. Barclays Center, it is especially unclear where such financial assistance could come from on privately funded jobs without performance bonding protection. Besides the tragedy of hundreds of skilled tradespeople suddenly out of work, and general contractors scrambling to locate and mobilize alternative fabrication sources, the collapse of fabricator availability for such critical building systems bodes very poorly for any construction industry recovery to economic health in the long run. Specifying architects, construction managers, and general contractors bidding for work on future construction projects of any sort need to exercise extreme care in evaulating the economic viability of their fabricators of critical systems across the entire timeline of any project. Otherwise, the economic difficulties of one fabricator can spill across the entire project, and threaten the survival of every trade involved.

Details Emerge In Chicago Set Aside Fraud Charges

Details of the methods used by three Chicago area minority set aside subcontractors accused by federal prosecutors of sham involvement on major public construction projects including the North Avenue Bridge, and the Chicago Transit Authority Red Line and Brown Line projects, are emerging from documents filed in court along with the charging papers. According to e-mail documents exchanged between employees of the accused businesses, and between the accused subcontractors and McHugh Construction, McHugh employees with the needed skills were shifted off the McHugh payroll onto the subcontractors’ payrolls when the subs were active on site, and then shifted back to McHugh’s payroll as the subcontractors’ work neared completion.  Foremen, superintendents, carpenters, laborers, equipment operators and oilers were involved in this payroll transfer, according to an FBI affidavit.

Certain e-mails reflect the understanding between accused fraudulent set aside subcontractor ASI and its concrete suppliers that “we aren’t going to worry about the name change from McHugh to Perdel Contracting on delivery tickets, so long as the billing gets billed through Perdel.”  The affidavit goes on to allege that ASI’s subs and suppliers took technical questions directly to McHugh “because ASI’s project managers did not have the ability to answer the questions.”

Apparently cross checking employee names and addresses between general contractor payrolls before and after a set aside contractor is on site with the set aside contractor’s payrolls during the set aside’s on site work should be a first order priority of Mayor Emmanuel’s promised new $11 million fraud prevention program.

Midwest Wind Farms Pick Up Steam – Wait! Is That A Mixed Metaphor?

The twin spectres of reduced property values, and piles of dead birds and bats have long plagued developeers of proposed wind turbine farms in Midwestern states. Now, however, two victories for wind farm development may be the twittering birds of a new spring for wind power development in the region. In Wisconsin, it appears Senate Republicans failed to muster enough votes to rescind a Public Service Commission wind siting rule. The uncertainty about the fate of the rule has held up wind farm development in Wisconsin since 2010.

In Ohio, the state Supreme Court issued a ruling March 6, 2012, upholding the decision of the Ohio Power Siting Board to permit construction of a 9,000 acre wind farm by Buckeye Wind LLC. Opponents of the project contended befire the Board and the lower courts that the 541 foot required setback of wind turbines from neighboring property was insufficient to protect against damage by turbine blades breakig loose and flying through the air onto a neighbor’s land.

While neither of these decisions settles the issues once and for all time, both of them give some hope to the proposals of beleagured wind power developers in the Midwestern United States.

Highway Trust Fund Legislation Stumbles Again

Hopes for passage of any long term Highway Trust Fund reauthorization legislation faded further this week as the Senate stumbled and fumbled action on its $41.6 billion per year, two year version of the measure. Current Trust Fund taxing and spending authority expires March 31, 2012, when the eighth band aid short term extension provision expires. The House version of the long term reauthorization bill, proposing $34.6 billion/year for five years, fell apart completely amid political warfare over its details and never came to a floor vote.

March 6 the Senate failed to vote cloture on its version of the bill, amid Republican desires to continue attaching amendments respecting non-germane issues like birth control insurance coverage, the Keystone XL pipeline environmental review, airborne emission controls on operating boilers, and offshore oil drilling. So far those Senate amendments have all failed, but the interminable Senate debate continues on every sort of proposed amendment any Senator hopes to attach to one of the few “must pass” bills of this session.

With $110 million per day in motor fuel tax revenues hanging in the balance, it seems likely another band aid temporary extension is in the offing until Congressional leaders put an end to their interminable deadlock over unrelated legislative initiatives. Meanwhile, unemployment in the construction industry remains at 17.7%, with no construction job promoting legislative relief in sight. The Congressional Budget Office estimates failure of a long term reauthorization with new revenue sources will bankrupt the Trust Fund near the end of this fiscal year.

According to California Senator Barbara Boxer, 1.8 million existing construction jobs and 1.0 million new construction jobs hang in the balance, while Congress twiddles its thumbs.

Chicago Grand Jury Returns Minority Set Aside Indictments

A federal Grand Jury in Chicago has followed up U. S. Attorney criminal informations with indictments of Elizabeth Perino and Anthony Capello, owners of two sham minority subcontracting firms which posed as woman owned businesses on City of Chicago construction contracts, but passed through more than $200 million of actual work to non-monority or woman owned firms, in violation of set aside rules.

Tracking criminal informations unsealed last month, the indictments accuse three subcontractors on City of Chicago contracts worth millions of dollars 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 McHugh Construction Company. McHugh has not been accused of wrongdoing in the criminal charges.

Responding to the indictments, Chicago Mayor Rahm Emmanuel pledged to appropriate $11 million for better oversight of the city’ construction set asides.

Construction Spending Gyrations Continue

Commerce Deartment figures released last week show construction spending in the United States down 0.1% overall, with sharp downturns in factory, hotel and power plant construction. A deep decline in federal government construction spending was partly offset by increases in state and local government construction outlays.

Residential building rose 1.8%, led by considerable gains in single family home construction.  The current pace of overall construction spending remains 32% lower than it was at the height of the housing construction boom.

Mayor Emmanuel Announces Chicago Infrastructure Trust

With the think tank promoted concept of revenue stream repayment to private investors in government infrastructure construction projects languishing in legislative limbo in Washington DC and Springfield, Chicago’s newly elected Mayor Rahm Emmanuel has stuck out his neck with the announcement of formation of a Chicago Infrastructure Trust to attract private funding for city building energy retrofits, a rapid ride bus system, and extension of the southern end of the CTA red line light rail service.  Local officials of Citibank and JP Morgan Asset Management have expressed “preliminary non-binding interest” in ivesting in the Trust.

Emmanuel made the announcement in a speech to Carpenter Union trainees at an appresticeship shop March 1, 2012. Acknowledging the ongoing declines in federal and state funding for infrastructure construction, Emmanuel told the aspiring union carpenters “Our needs are growing. I can either look at that challenge, and stare at it hoping it gets better, or do something about it.” Whether the “non-binding interest” by private investors will materialze into real dollars invested remains to be seen.