Friday, May 18, 2012

Chicago’s River Point Office Tower – Another Block 37 TIF Debacle?

May 16, 2012, Mayor Rahm Emanuel announced a tax increment financing grant of $29 million to Hines Interests Limited Partnership for construction of a 45 story, 850,000 square foot, $300 million office tower to be called River Point, at 444 West Lake Street. The proposed office building qualifies for TIF financing because it is a “redevelopment” of blighted riverfront land west of the banks of the Chicago River where the main branch splits into the South Branch and the North Branch. The property Hines owns lies east of Canal Street and west of the Milwaukee Road commuter tracks leading north from Union Station to Elgin and Big Timber, Antioch, and Fox Lake, directly along the riverbank. Views from the proposed tower would look west across the cityscape and east at the Apparel Mart and Merchandise Mart.

Hines has previously announced construction of a 50 story office tower on this site, and when two major tenants withdrew from that project, scaled back the concept to a 40 story building. The current 45 story proposal is designed to have 26,000 square foot floor plates, a 170 car parking garage, white tablecloth restaurant, fitness center, conference center, and a 3,600 square foot pavilion on the east side of the Hines property. The TIF money, plus another $30 million from Hines, will go toward construction of a grassy park to be located on air rights above the Milwaukee Road commuter tracks.

In announcing the new concept, Mayor Emanuel touted tax revenues from the to be developed property, plus creation of 1,000 construction jobs. He says the Hines determination to proceed with new office construction in the West Loop neighborhood signals business confidence in the competency of his administration to meet the city’s financial problems head on. “Of you do the fundamentals right people will bet on the leadership that a city is showing, not running away from its future. Denial, as I’ve always said, is not a long term strategy, but meeting its challenges head on. Confidence is the cheapest stimulus you can but. It’s free.”

Before the new mayor gets too big for his britches in the confidence department, he should look back over the city’s history in redeveloping blighted loop property and building grassy parks above commuter rail lines.  It took decades and a baker’s dozen failed redevelopment proposals before Block 37, directly across from the Daley Center in the heart of the loop, could be redeveloped with anything economically viable, and even now parts of that commercial redevelopment are struggling to make a profit. And the now complete Millennium Park, which started out as a grassy field on top of lakefront METRA Electric commuter tracks, could be made into what it is today, there was an infusion of $250 million donated by then cash flush Chicago businesses and rich citizens. Even so, Millennium Park went more than $33 million over budget, even without counting the millions in legal fees consumed in litigation over design, engineering and fabrication errors on the project.

Finally, Mayor Emanuel needs only look eastward down the main branch of the Chicago River from the proposed development site to see the concrete skeleton of the incomplete Shangri La Hotel standing 27 stories above the south riverbank where work stopped altogether three years ago because the project could not be financed.  How many unfinished high rise towers does Chicago’s skyline need?

Wednesday, May 16, 2012

Topeka Housing Authority Stimulus Spending Fails Federal Audit

The scent of cronyism in contractor selection for local public housing construction surrounds yet another Kansas public housing project for seniors, according to a HUD Inspector General’s audit of the Topeka Housing Authority use of federal stimulus dollars to build Tennessee Town II. The Topeka agency received a total of $12 million in Recovery Act funding, and of that amount $833,000.00 was designated for construction of 16 elderly housing units at Tennessee Town II. According to the IG Audit Report, the process for selection of a private developer for construction of Tennessee Town II was not documented at all in writing, and there was no identification of selection criteria for the builder, or the reasons supporting the final choice.

All the Authority would tell the IG was that the developer was chosen on the basis of conferring with other local housing authorities and then with two potential developers identified in that process. The Topeka Housing Authority claimed it does not have a checklist of procurement policies for its staff to follow. Nevertheless, the agency was able to use public bidding and written award criteria to document contractor selection for its much larger Echo Ridge construction project.

Could it be that local officials thought that by sending out written RFP’s for the big job, they could cover up their cronyism in awarding the little one to their buddies?

Galveston Post Office Repairs Violated Buy American And Davis-Bacon Laws

A recently released audit of the $5,268,344.00 contract for repair of storm surge damage to the Galveston Post Office and Courthouse building during Hurricane Ike found numerous violations by the principal contractor and its subcontractors of stimulus funding buy American and Davis-Bacon requirements. Federal government agencies, it seems, are having at least as much difficulty as various state bureaucracies in complying with legal requirements for spending funds appropriated under the stimulus passed by Congress in 2009.

The federal agency responsible for the repair contract, the Public Buildings Service, has improperly permitted installation of Canadian manufactured replacement boilers, in violation of stimulus appropriation “Buy American” provisions. The value of the $35,210.00 boilers was supposed to promote preservation or creation of US manufacturing jobs, but instead went north into Canada.

Furthermore, PBS permitted numerous violations of Davis-Bacon requirements that tradespeople working on stimulus funded construction projects be paid wages prevailing in the locality of the project for their specific trades. General contractor Jim Cooley Construction failed on numerous occasions to even submit to PBS the required certified contractor and subcontractor payrolls. Auditor interviews of tradespeople employed by Cooley’s subs demonstrated underpayments of up to $11.91 below Labor Department prevailing wage rates for the Galveston area.

When Cooley’s trade contractors did bother submitting certified payrolls to PBS, the required certifications of fringe benefit payments were often missing or fraudulent. Cooley’s major mechanical subcontractor, Lakewood Mechanical, Inc., failed to pay fringe benefits of up to $10.17 per hour for sheet metal workers. As many as 13 Lakewood employees were underpaid benefits in each pay period. Another Cooley sub, Mechanical Plumbing, Inc., certified payment of 243 hours of fringe benefits to a benefit fund that doesn’t even exist.

Texas is an anti-union, right to work state. You have to wonder whether Galveston PBS bureaucrats were influenced by that fact in permitting such gross violations of buy American and prevailing wage laws right under their noses on this construction project.

Tuesday, May 15, 2012

Manhattan, Kansas Housing Authority Flunks Federal Audit

A recently released stimulus funding audit at the Manhattan, Kansas Housing Authority reveals that the local agency overspent by 19.4% on an improperly issued change order for ductwork insulation asses to a housing contract for renovation of unit HVAC and water heating equipment, and overstated the jobs created by the project by 37.9% in reporting project data to the federal website.

US HUD’s Inspector General audited the Housing Authority’s use of nearly half a million dollars in federal Recovery Act grants and found that the agency improperly issued a change order increasing the scope of work to include duct insulation for an additional cost of $53,220.00 without taking competitive bids, and giving an improperly documented change order to the contractor already on the job for an price inflated by as much as $10,340.00 in undocumented overhead and fees as a result of the Housing Authority’s lack of written procedures for processing contract change orders.

The audit also revealed that the agency reported its project had created 37.9% more jobs than were actually produced by the half million dollar expenditure. With this kind of inaccuracy from local governments who were awarded stimulus grants designed to improve local area employment, it’s no wonder our political leaders can’t agree on how to go about stimulating further economic growth.

Missing Pittsburgh Contracting Records – Sloppy Recordkeeping Or Cronyism?

An audit of 60 Pittsburgh urban renewal design and construction contracts released May 10 by Pittsburgh Controller Michael Lamb shows that 30 of those files are missing required documentation regarding project advertisements, bid openings and evaluation and ranking of responding proposals. Urban Redevelopment Authority Director Rob Stephany’s only response: “There is room for improvement.” Of course, public and press requests for documentation under freedom of information laws is a useless exercise if the documents which should be in every public contracting file, by the agency’s own rules and policies, are lost or were never created.

Lamb’s audit points out that Stephany’s files don’t even include a checklist at the front identifying the records which should be included in the file. This simple office procedure could lead to better record keeping, or it could serve to point out instances where cronyism replaced “lowest responsible bidder” as the criterion for selection of the winning contractor. Lam’s audit report noted that “Compiling a checklist for the documentation and including it in the front of the file may help keep track of the required paperwork.” Duh! Maybe the absence of a checklist is the agency’s way of hiding misfeasance from public scrutiny.

Fraud Claims Prompt Resignation Of Washington Minority Contracting Director

Televised claims of fraud and lack of responsiveness to Washington DOT minority business certification deadlines have led to the resignation of Washington Office of Minority and Women Owned Business Enterprises Director Cathy Canorro. The resignation followed the third day of televised KING-5 news reports detailing contractor claims of fraudulent certification that unqualified businesses were certified by Canorro as eligible for women and minority set aside work on state projects. Several state ethics investigations regarding conduct at the OMWBE are also underway.

Canorro has also been under pressure from WDOT for failing to timely process applications of contracting companies for minority or women owned business certification, leading to an ultimatum April 17 from Washington Governor Chris Gregoire to shape up or face reorganization of OMWBE. Federal law requirements for MBE and WBE certification to receive set asides called for on numerous federally funded Washington construction projects have been the subject of criminal prosecutions for fraud in several jurisdictions in recent months.

Governor Gregoire’s press official Karina Shagren says the future of the state’s minority and women owned business certification process is uncertain. “A structural review of OMWBE is still underway, as is a top to bottom performance review. Once those reviews are complete, we’ll have a better idea of how the state will conduct the duties of OMWBE moving forward,” Shagren said. “In the meantime, a search will begin to identify candidates to replace Cathy.”

Pollution Versus Power Wheeling – Ameren Threatens Power Plant Shutdowns

St. Louis based Ameren Corporation is threatening to shut down two of its coal fired Illinois power plants unless the Illinois Pollution Control Board gives Ameren a five year extension on the January 1, 2015 deadline for installing sulfur dioxide scrubbers at those facilities. Pleading poverty, Ameren President Steven Sullivan says, “Current market prices for power simply do not allow further investment in pollution control equipment at this time.” Pointing out that the utility has had eight years notice of the stack gas scrubber installation deadline, Rebecca Stanfield of the Natural Resources Defense Council opposes any extension: “The public shouldn’t have to tolerate another five years of unscrubbed coal pollution or the health consequences that result from operating an ancient plant with last century technology. If it turns out that there are more cost-effective and cleaner ways of meeting our electricity needs, the market will allow those solutions to replace the existing coal fleet.”

While petitioning for the scrubber deadline extension, Ameren is also seeking an additional avenue of relief – removal of power grid barriers that presently prohibit Ameren from wheeling power across the grid to northern Illinois markets where it could get a higher price per kilowatt hour, enabling investment in faster scrubber installation. It remains to be seen whether either solution to Ameren’s capital investment woes will materialize any time soon.

Chicago Mayor And City Council Pushing O’Hare Air Freight Terminal Expansion

Mayor Rahm Emanuel announced May 14 that the City Council Aviation Committee will take up approval of a major air freight terminal expansion at O’Hare on its June agenda. The city’s aviation department has selected Aeroterm, a private developer of ten million square feet of airport freight facilities at 120 different locations, to build the new 840,000 square foot aircraft ramp served freight terminal on former Air National Guard property on the O’Hare grounds. The proposed new facility will just about double O’Hare’s air freight capacity, will carry the first LEED certification for privately developed air freight terminals, and will be capable of handling the new generation Boeing 747-800 aircraft.

Aeroterm is investing $125 million of its own capital into the project, with the City of Chicago providing an additional $62 million from airport fee revenue to the construction cost, plus the land acquired by the City from the Defense Department in 1996. The project is expected to directly create 1,200 construction jobs and another 1,200 permanent jobs at the new fright facility. The first phase of the new terminal is expected to open next year, with completion of the entire 840,000 square feet within the next ten years. Economic activity generated as a result of this expanded capacity is predicted to create another 10,000 indirect jobs in the Chicago area economy.

Aeroterm already operates about one million square feet of freight terminal capacity on the O’Hare airport property. O’Hare handles 1.5 million tons of air freight annually, or about 10% of all US air cargo. Chicago three area airports generate $45 billion in annual economic activity, and produce 540,000 jobs in the metropolitan area. Chicago Aviation Commissioner Richard Rodriguez points out the importance of air freight in the announcement of City Council action on the O’Hare air cargo expansion: “Air cargo is of prime importance to the economic vitality of our city, region and state. This development will approximately double O’Hare’s cargo capacity and strengthen our leading role as a national and international air freight hub.” O’Hare’s position as part of the Port of Chicago’s foreign trade zone will enhance Chicago’s position in the overseas import and export markets, particularly for consumer electronics, and perishable goods like produce and flowers imported from overseas. Aeroterm President and CEO John Cammett responded to Mayor Emmanuel’s announcement, “We are honored to be selected and entrusted by the City as the developer of this high profile project and look forward to growing our established and highly regarded relationship with the City and the O’Hare air cargo community. We recognize and value the importance of this project and underscore the City’s priority of expanding O’Hare’s cargo infrastructure and improving its efficiency.

Monday, May 7, 2012

Government Gridlock Keeps Stalling Job Growth

Politicians all say the economy needs more jobs. Job growth depends more than anything else on certainty about government spending and tax policy. Yet our political leaders can’t get their act together long enough to take any action letting us know what future government policy will be. As a terrible result of their inaction, we have little job growth and slower economic growth.

In 2009, the American economy declined 3.5%. In 2009 Congress enacted a package of significant stimulus spending, and in 2010 the American economy grew 3.0%. Then the 2010 Congressional calendar was used up in government budget gridlock, with a number of quarter by quarter emergency budget measures passed just to keep the bureaucratic doors open in Washington, D.C. As a result, American economic growth slowed to a paltry 1.7% in 2011, and talk of a “double dip” recession was rampant.  Learning nothing from the first year of gridlock, Congress continued to pass band aid interim spending measures all through 2011, with no action on those appropriation bills which set government budgets for more than a year into the future. As a consequence, businesses that depend for some of their revenue on having government as a customer couldn’t plan long term expansion. Furthermore, Congressional stalemate on long term tax policy stifled business investment decisions. This ongoing gridlock isn’t helping the American economy, capping first quarter 2012 growth in our economy at 2.2%.

Consumers have been tightening their belts for three years now, and first quarter 2012 consumer spending is up 2.9%. Most of that gain is represented by higher motor fuel prices and increasing auto sales, neither if which is a reliable long term engine of future progress. That consumer spending growth is offset by a 3.0% drop in government spending for the quarter, along with a 2.1% drop in business investment, stifled by ongoing tax policy uncertainty coupled with expiration of some investment tax breaks on December 31, 2011. Economists tell us we need year long economic growth exceeding 4.0% to bring down unemployment by one point. Because consumer spending is 70% of the economy, job growth is the only thing that will get us back on track to a “healthy” overall growth rate of better than 2.5%.

Every day our Representatives and Senators leave those important long term appropriations measures and tax reform bills sitting on the tables in committee rooms costs the economy months and months of sluggish growth.

Congressional Gridlock Drives Up Ohio Road And Bridge Costs

Lack of future funding – read, Congressional inaction on Highway Trust Fund legislation – will cost taxpayers in just one state, Ohio, $148 million dollars, according to transportation officials there. Last month Ohio Department of Transportation Director Jerry Wray told ODOT’s Transportation Review Advisory Council he needs to cancel the 14 smallest road construction projects on his docket, in order to have cash to pay for highway and bridge repairs needed to keep the state’s roads open due to lack of certainty respecting funding for pavement and bridge replacement projects scheduled in the near future.

Wray’s announcement is the first state highway department report that actually looks at the dollar cost of putting off road and bridge construction over the next decade. The projects Wray wants to scratch off the present list would cost $148 million; that’s the amount he will need for “band aid” repairs to interstates in Cincinnati, Cleveland and Columbus that would have been replaced soon if he could count on $1.6 billion in federal money to pay for the work. According to Wray, some of the replacement projects are now likely to be put off for as long as 18 years, driving up the cost of keeping potholes filled on the aging roadways and bridges. “If you delay these things, you’re going to have more maintenance expenses. That has to be a component of our considerations,” Wray announced to the Advisory Council.

Mark Kelsey, Columbus’ public service director, concurred in Wray’s announcement. “You’re constantly putting band aids on. You’re spending dollars trying to do a short term fix that really requires a long term fix,” he said. According to Cuyahoga County Public Works Director Bonnie Teeuwen, bridge repairs must take budget priority over roads, in an environment where cost considerations put off the replacement of bridge spans already past their predicted design life. “If a road fails, you have a pothole,” she said. “If a bridge fails, you lose lives.”

Although it’s clear that other state transportation officials are busy making comparable calculations regarding which construction projects need to be canceled to pay for repairs that will be needed because a few months of Congressional dithering mean years and years of budget uncertainty for the states, Senators and Congressmen are still putting campaign rhetoric talking points ahead of their obligation as the nation’s leaders to actually do something about this problem.

Saturday, May 5, 2012

Contractors Should Always Say “We” Instead of “I”

You spend a considerable sum of cash to have your lawyer set up your contracting business as a corporation, an LLC or LLP, so that your backhoe, your pickup and your tools may be at risk, but your house, your Cadillac and the money you have set aside for sending the kids to college is not exposed. Then you walk onto a job site or into a customer’s office and tell them “I guarantee the work,” and all that costly legal paperwork goes right down the drain.

As a court in Pennsylvania recently held, and as most other courts would follow, using the word “I” can expose you to personal liability where your business would otherwise be the only entity responsible under a contract or statute respecting the project. “We” refers to your corporation, company, business or firm; “I” refers to yourself personally – you can’t afford to ever forget the difference.

The Pennsylvania case is Bennett v. A.T. Masterpiece Homes, 2012 Pa. Super 60 (2012). Two home buyers sued A.T. Masterpiece LLC and its managing member Grant Colledge for construction defects in their brand new homes. A jury verdict against both A.T. Masterpiece and Colledge personally was affirmed on appeal, though Colledge argued that the home buyers had contracted only with A.T. Masterpiece, and not with him individually. The Pennsylvania Superior Court, in affirming the verdict and judgment against Colledge individually, held that Colledge’s statements at the construction sites to the homeowners that “I guarantee it,” or “I will take care of it,” constituted a personal assumption of liabilities for correcting the work of his business which he would not have had in the absence of his remarks.

So, whether your name is Colledge, Walsh, Turner, Pepper or something else, “we” refers to your contracting business, and “I” refers to yourself personally – you forget the distinction at considerable financial peril.

Digging? Phone 811

Telephone numbers: 911 for emergency response; 411 for directory assistance; 311 for doing business with city government; 811 for finding out what’s underground before you dig. Five year ago this month, Common Ground Alliance was formed to unify and centralize response to inquiries about locating underground utilities so contractors and others can dig without disturbing them. The number is available to everyone from general contractors and excavators to homeowners and landscapers who might be planning to disturb the soil.

The nationwide one call number 811 was initially approved by the FCC in March 2005 to bring uniformity to the underground lines information services with differing phone numbers in separate regions of the U.S. In April 2007, Common Ground Alliance was charged with implementing the 811 system nationwide, and in 2006 North Carolina became the first state to fully implement the program. Though some contractors keep old phone numbers in their speed dial, up to 70% of underground utility location service calls are now made through 811.

CGA’s educational efforts respecting 811 calls now have equipment rental companies posting the 811 number on the cab doors of excavators and backhoes, CGA offers 811 decals in English and Spanish, customized with company logos. Now the non-profit organization is initiating outreach programs to homeowners and fencing installers, reminding us that fences almost always go in near property lines, just where underground utility easements are most likely located. A single post hole crossing a utility line can result in service interruptions, leaks, explosions, property damage and bodily injury or death, CGA warns. One call to 811 will result in every underground utility with lines in the area coming out to a property to clearly mark the locations of their facilities.

CGA President Bob Kipp says it succinctly: “Call 811 before you dig!”

The Silver Line’s Real Problem Is The PLA

Union bashing, Davis-Bacon hating Republican politicians in Northern Virginia would rather stop construction of Silver Line mass transit service from Washington, D.C. to Dulles International, than see it seamlessly completed under a project labor agreement. What these folks see as a union labor victory in the PLA is in reality something which takes away the power of organized labor to extort concessions from contractors and material suppliers by threatening strikes which could delay completion and drive up overall project costs in these times of rapidly accelerating commodity price increases.

The first phase of building Washington, D.C.’s $5.6 billion Silver Line Metro commuter tracks into Dulles International is on schedule for completion next year, and will run from Tysons Corner to Reston, but the next leg of trackage through Loudoun County is in jeopardy before the all Republican Loudoun County Board. Loudoun County must vote its stretch of track up or down by early July. If the Loudoun portion of the Silver Line fails, the project would have to be rerouted at best and might get killed altogether at worst.

A study from George Mason University’s Center for Regional Analysis reports that completing the commuter line through Loudoun County will produce 40,000 jobs to the county by 2040, and drive more than $55 billion in potential economic activity. Nevertheless, Republican board members are taking their cues from Virginia Governor Robert E. McDonnell, whose tepid support for the Silver Line construction has not included more than a 5% state contribution towards the cost of building the tracks. Roadblocks thrown up by Republicans to phase two of this project – all pretexts for their desire to get rid of the PLA – include opposition to partial funding through increased highway tolls, a USDOT audit of phase one, and requested appointment of an Inspector General to monitor Metropolitan Washington Airports Authority administration of the construction.

Even if the project could survive a pull out by Loudoun County, financing for construction and operation of the commuter line would have to be renegotiated, a route redesign performed, and new right of way acquired; and the resulting loss of time would undoubtedly drive up the finished project budget by another $1 billion or so. Rather than looking to Richmond for guidance on this issue, Loudoun County should be listening to its own constituents – every major business group in the county supports Silver Line construction as presently planned.

Tunneling Concerns Stump Subway To The Sea

Los Angeles METRO’s plans for a western extension of its subway lines along Wilshire Boulevard and Santa Monica Boulevard all the way to Santa Monica Pier were blocked last week when more than 100 witnesses, including angry parents and teachers of Beverly Hills High School students, protested plans to tunnel beneath the school’s 19.5 acre campus on Moreno Drive.  In response, METRO’s board approved the 3.9 mile Wilshire Boulevard phase, but voted to hold public hearings on safety of the high school tunnel before giving the go ahead to the last 5 miles of the project.

Completion of the $5.66 billion project may have to await completion of a study commissioned by Beverly Hills officials to suggest alternate routes around the school. Franny Rennie, Beverly Hills high School PTA president, says student safety should be METRO’s first priority: “Your experts keep saying it’s safe. Well, there’s no guarantee. Our number one point is safety for our 2,000 students. Don’t risk our kids.”  Opposing the delay for public hearings, transit advocate Denny Zane responded: “I see no public evidence that there are genuine risks to the high school,” he responded.

MTA board member and Los Angeles County Supervisor Zev Yaroslovsky predicted the battle over the high school tunnel may be headed for the courts. “If we’re going to get into a court battle with the school district, let’s get that started now,” he blustered. Maybe the truth is that the Beverly Hills moms and dads who drop their kids off at school in their Bentleys just don’t want a subway stop frequented by the less fortunate anywhere near their precious campus.

Friday, May 4, 2012

Los Angeles Won’t “Buy American” For Subway Cars

Generating a great deal of controversy, and two bid protests, Los Angeles County MTA voted Monday, April 30, to award the $890 million contract for construction of 235 new subway cars to Kinkisharyo International, a Japanese company that doesn’t even have a factory on this side of the Pacific yet. The new cars are needed to put rolling stock on the rails for the Crenshaw, Expo, Santa Monica and extended Gold lines, and to make up for a failed 100 car contract with Italian manufacturer AnsaldoBreda which fell apart late in 2009.

Competing bidders Siemens of Germany and Construcciones y Auxiliar de Ferrocarriles of Spain, both of which already have plants on American soil, are prosecuting protests of the award to the Japanese firm. Also opposing the award are the Urban League, Southern Christian Leadership Conference, and the Los Angeles County Federation of Labor. Siemens, which already has a factory in Sacramento, promised to open a new one in Los Angeles, and to invest $5 million in job training programs there. Siemens’ bid could have created up to 1,122 new American jobs, the opponents of the award say.

CAF USA has a plant in Elmira, New York. Though the Siemens price was more than the Japanese concern, CAF USA underbid Kinkisharyo by $104.4 million. CAF’s proposal predicts creation of 205 U.S. jobs. The Federal Transit Administration is reviewing the Japanese bid to determine whether stimulus legislation “buy American” requirements have been met, and final approval of the award is subject to the results of that review. METRO CEO Art Leahy says he is confident the FTA will approve the contract with the Japanese.

Well, you may ask, where are the full blooded American bidders? There aren’t any. Since Budd stopped manufacturing rail cars on April 3, 1987, and sold its designs to Canadian rail car and aircraft maker Bombardier, there hasn’t been any all-American passenger rail car maker on the scene. So much for Congressional mandates that stimulus funds be used to purchase products “Made In USA.”

Tidal Power Commercialization Progresses

The moon’s gravitational pull causes ocean waters to ebb and flow all along shorelines all over the world, in some locations more than 20 feet every day. Now the force of all this moving water might actually be harnessed to produce electric power on a commercial scale here in the United States. Last week the Maine Public Utilities Commission set the terms for contracts between Portland based Ocean Renewable Power Company and three Maine utilities – Central Maine Power, Bangor Hydro Electric Company, and Maine Public Service Company – for the purchase and sale of tide generated electricity for the next 20 years. Ocean Renewable plans to install a demonstration turbine in Cobscook Bay this summer, capable of providing enough power for 20 to 25 homes.

Additional turbines offshore near Lubec and Eastport should bring production up to 4 megawatts by 2016 – enough electricity for more than a thousand homes. Maine regulators have set the rate to be paid to Ocean Renewable for this power at a subsidized level of 21.5 cents per kilowatt hour, nearly double the current rate paid by Maine citizens for traditionally generated electricity. The tidal power rate will only be allowed to increase 2% per year over the 20 year life of the term set by the Public Utilities Commission, and it is expected to become competitive with traditionally generated electric rates after five years or so, as fossil fuel prices escalate at a much more vigorous pace.

Ocean Renewable’s turbines are shaped something like an old fashioned reel type lawn mower mechanism, as they will sit on the ocean bottom. Fundy Tidal of Nova Scotia plans installation of similarly shaped turbines in the Bay of Fundy, where even greater tidal forces exist, if the Ocean Renewable project is successful. Ocean Renewable already has a pilot project license for its installation from the Federal Energy Regulatory Commission. Another FERC pilot project license has been issued to Verdant Power for an installation in the tidal basin of New York’s East River, using different shaped underwater turbines that look more like the now familiar windmills dotting the rural landscape across the Midwestern United States.

Ocean Renewable President and CEO Chris Sauer describes his company’s initial installation as “A landmark in the commercialization of tidal energy in the U.S.”

Wind Power Layoffs Mounting While Congress Remains Gridlocked

Federal Renewable Energy Production Tax Credits are scheduled to expire December 31, 2012, unless Congress acts to extend them. Congress isn’t doing anything about moving extension measures forward. The wind energy industry needs at least 18 months of certainty about availability of the credit to make starting a new project economically viable. As a result, industry layoffs are already beginning, and by the end of 2012’s second quarter are expected to reach 10,000 jobs lost.

Passage of time makes the picture even bleaker. Without Congressional action, wind power layoffs could reach 20,000 jobs lost by the end of the third quarter and 30,000 jobs lost by year end. Navigant Consulting predicts total wind energy job losses in the next 12 months to reach 37,000 if Congress waits until the last minute to extend the tax credits.

On the other hand, if Congress were to act now, according to the American Wind Energy Association, the industry could create 100,000 new jobs in the next four years. Certainty about tax credit availability is the key. Newton, Iowa’s wind turbine blade maker TPI Composites CEO Steve Lockard says “Our company has created more than 700 new jobs in Newton, and a second wind energy company there now employs over 100 people. Our industry can do the same in hard hit towns all across the U. S. if Congress will let us, and doesn’t increase taxes on wind power next year.”

Apparently the only wind blowing through the Capitol building in Washington, D.C. is political hot air.

Wyoming Governor Lobbies USEPA To Back Off Fracking Pollution Findings

Wyoming Governor Matt Mead dialed USEPA Director Lisa Jackson’s direct line last November and persuaded her to delay for weeks release of USEPA data on well water contamination in Pavillion, Wyoming which EPA had concluded was a result of increased fracking operations in the area. During the delay, Wyoming officials mounted a vigorous campaign attempting to debunk the federal agency’s conclusions and persuade Pavillion residents that shale oil and gas operations in their neighborhood hadn’t polluted their wells.

According to e-mails between Wyoming state officials, the state took advantage of the delay until December 8 in releasing USEPA findings to “take a hard line” and coordinate an “all-out press” against the federal agency’s conclusions about the cause of the pollution. Wyoming’s State Oil and Gas Supervisor Thomas E. Doll worried over the effect the EPA findings could have on the state’s revenue from shale oil and gas operations there. One of Doll’s agency engineers, Gary Strong, warned that state objections to the EPA findings would be ineffective. “It’s already too late,” Strong wrote. “The White House has already seen the report with conclusions.” Lamenting the likely ineffectiveness of a surreptitious lobbying campaign to modify or weaken EPA conclusions about fracking pollution in the state, Wyoming Oil and Gas Conservation Commission natural resource analyst Tom Kropatsch described the situation at a November 16, 2011 meeting: “Once local folks received the data and it showed what it did they had the responsibility to take it to HQ and in fact it ended up with them in front of the White House. HQ and the White House decided that now that data is released EPA must release conclusions quickly.”

Now, Governor Mead is complaining that USEPA has tested well water in the Pavillion area from private wells as well as the two monitoring wells the agency drilled itself. “I won’t tell anybody not to test,” Mead said April 30. “But if you’re going to test, you need to bring everybody into the process.” EPA Region 8 Director Jim Martin responds that EPA “has been transparent and relied on the best science” in keeping Pavillion area residents informed about the pollution in their wells.

Almost all of the oil and gas in Wyoming comes either from coal mine beds or from fracking operations, and amounts to a $7.7 billion/year industry accounting for 20% of the state’s gross domestic product. Summarizing the reasons behind Wyoming’s attack on the EPA pollution findings, Oil and Gas Supervisor Thomas E. Doll circulated an e-mail message among top state officials. “Limiting of the hydraulic fracturing process will result in negative impacts to the oil and gas revenues to the state of Wyoming. A further outcome will be the questioning of the economic viability of all unconventional and tight oil and gas reserves in Wyoming, across the United States, and ultimately in the world,” Doll wrote.

USEPA testing of its fracking monitoring wells in the Pavillion neighborhood found the carcinogen benzene at 50 times the allowable level. EPA tests also  found high pH water in the wells due to potassium hydroxide, a chemical used in fracking operations. Pavillion Area Concerned Citizens Chairman John Felton is unhappy about USEPA’s delaying the release of its findings for several weeks, but reflects his neighbors’ distrust of Wyoming government and Supervisor Doll: “Those of us living out here, we don’t trust the state.”

When it comes to pollution of private wells and Wyoming tax revenues, the big money wins every time.

Keystone XL Pipeline Politics

Trans Canada is expected to file a new application for the rerouted cross-border segment of the controversial Keystone XL tar sands bitumen pipeline today, May 4. The filing will reignite the election year political rhetoric surrounding environmental permitting and construction of the huge project. The southern leg of the new pipeline, from Cushing, Oklahoma to Port Arthur, Texas, is already in the 45 day Corps of Engineers permit process. If the Corps does not deny the permit within the 45 day period, it will be automatically granted. The northern segment, from Hardisty, Alberta to Cushing, requires a permit from the State Department because it crosses the international border between the U.S. and Canada.

Trans Canada’s proposed new route across Nebraska dodges what that state has defined as the environmentally sensitive Sandhills region, but environmentalists say that Nebraska bureaucrats have defined the Sandhills too narrowly, and also complain that the new route will still carry the thick crude over parts of the Ogallala aquifer, which provides drinking and irrigation water to an eight state region, including parts of Colorado, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota, Texas and Wyoming.

Over a quarter of all irrigated farmland in the United States is served by the Ogallala. Eighty two percent of the folks living above the Ogallala get their drinking water from it. Those key facts, plus the general environmental opposition to Canadian tar sands mining as a contributor to global warming, form the basis of opposition to the pipeline. However, election year campaign rhetoric is more likely than scientific fact to determine the outcome of the permitting process.

House Speaker John Boehner has issued yet another statement on Keystone XL, proclaiming that, “With Nebraska now on board and the application being re-filed, the president has lost his always flimsy excuse for blocking this job creating project. With energy security at stake and jobs on the line, he should listen to the American people, not just his political base, and approve it immediately.” Environmental opponents to the project are equally adamant. Bold Nebraska Executive Director Jane Kleeb responds, “The fundamental facts remain; Americans are being asked to put clean water at risk for an extreme form of energy that will add nothing to our energy security.”

At least the environmentalists don’t deny that building the project would create jobs.

Minority Set Asides Delay Nine Figure Chicago METRA Project

Objections to low levels of minority participation by three African American Congressmen from Illinois have delayed the award, and the completion, of construction of a $141 million railroad bridge in the Englewood neighborhood designed to relieve freight and commuter rail conflicts and delays. Representatives Bobby Rush, Danny Davis, and Jesse Jackson Jr. succeeded in delaying the award of the contract from the May 11 METRA board meeting until at least June 15. The delay in awarding the contract could set back completion from June 2014 until the fall of that year.

Despite two years and $300,000.00 of community outreach by METRA in Englewood, the apparent low bidder on the Rail bridge project, dubbed the “Englewood Flyover,” pledged less than 1% of the subcontract work to an African American firm, and less than 3% to DBE businesses.  The letter from the three Congressmen to the METRA board decries the lack of black business participation in this major public construction project in a high crime black neighborhood: “It is unacceptable that a public procurement process wherein millions of taxpayer dollars are expended could have at its very core the systemic disenfranchisement of a community of people,” the letter scolds.

Maybe the three Congressmen ought to walk over to Chicago’s federal courthouse and examine the charging papers in recent federal indictments for minority set aside fraud in the city, and look into the possibility that past “successful” public contracts touting subcontracting levels of 10% MBE and 5% WBE participation were based on seriously dishonest calculations of those numbers.

Thursday, May 3, 2012

Congress Can’t Even Agree How To Stop Agency Conference Excesses

After a week peppered with five House and Senate subcommittee hearings into the well publicized excesses of the GSA’s 2010 Las Vegas regional conference, you would think Congress would be jumping all over legislative measures to curb such wasting of taxpayer funds in the future. You would be mistaken.

While the House promptly brought to its floor and passed HR 2146, the Digital Accountability and Transparency Act, slashing agency conference budgets 20% across the board, capping single conference costs at half a million dollars, limiting attendance at international meetings to 50 or fewer employees and requiring agency conference spending to be made public on every government website, that legislation went to the Senate Committee on Homeland Security and Government Affairs, where it ran head on into Nevada Senator Dean Heller’s SB 2469, which would prohibit government agencies from adopting policies against using resort destinations as locations for their meetings.

Rather than watching the conflagration which could have resulted from this legislative impasse, the Senate unanimously consented to add the DATA Act as an amendment to the Postal Service reform measure it has under consideration, and which will languish in a conference committee when Representatives and Senators can’t figure out how to make the Postal Service cut expenses dramatically without closing any post offices or mail handling centers that mean jobs to someone’s constituents. When will we know that federal agency conference spending is actually under control? Only when a bill gets through both houses of Congress and is signed by President Obama. Earl Devaney, former Chairman of the stimulus spending RAT board, put it succinctly: “Nothing makes a bureaucrat move faster than a piece of legislation. Legislation is the only way to get all these agencies to do the same thing at the same time.”

So, years from now when the press in trumpeting investigations of yet another resort based, lavish government agency conference, you will remember what happened when the bill to control and report these excesses was mired in Congressional gridlock.

Stalled VA Hospitals And Clinics Dot The Landscape

The Veterans Administration currently has four hospitals and 55 medical clinics under construction around the country since 1998. According to House Veterans Affairs Committee Chairman Jeff Miller, all four hospital projects and 38 of the clinic projects are behind schedule, with a dozen of the clinic projects delayed more than three years. Total construction costs for the 59 buildings: $442 million.

“I am not assured the VA has the right team in place to oversee and manage these projects,” Miller says. “We have seen across VA contracting that there are deep rooted problems, and leadership allows these problems to persist. We hear over and over in testimony that no one is to blame, or held to account. Someone must be accountable for these problems. It appears we have a leadership vacuum which is an even larger problem.”

The delayed VA hospital projects are in Denver, Las Vegas, New Orleans and Orlando. Denver’s hospital construction was delayed over a year when VA changed the concept from a hospital to a clinic, then later back to a hospital. Typical construction delays set the Las Vegas hospital project back four months. In New Orleans, the hospital project was delayed two years because  the City of New Orleans failed to deliver “construction ready” land from  November 2009 until April 2011. In Orlando, the hospital project was set back and pushed over budget by medical equipment purchase decisions that required repeated changes in the designed sizes of rooms to house the equipment.

Chairman Miller says the agency needs to develop an improved construction procurement process. “Until VA applies private sector principles to mitigate cost increases and schedule delays, we’ll have these problems,” he concludes.

Corps Of Engineers Construction And Defense Cleanup Budgets Gridlocked

Competing Senate and House appropriations measures funding civil construction by the Army Corps of Engineers, and environmental cleanup of sites contaminated by the Department of Defense are stalling fiscal 2013 budgeting for yet another federal agency’s construction planning. The Senate Appropriations Committee has proposed 1% increases in both Corps of Engineers civil construction and DOE defense site cleanup programs, while the House version seeks cuts of 4% in Corps civil construction funding and 2% in environmental cleanup spending.

Additional gridlock factors include the absence from the House bill of the Senate committee’s pilot program for consent based process of siting a new locale for interim spent reactor fuel rod disposal. House committee amendments have added two provisions left out of the Senate version – a measure to block DOE from requiring renovated federal buildings to reduce dependency on fossil fuels, and a provision precluding further guidance on the definition of federally regulated waters for pollution control purposes.

Once again, it seems the desire to create political party election campaign talking points is taking precedence over the need to fund government programs important to national economic recovery in general, and the resurgence of the construction industry in particular.

Wednesday, May 2, 2012

USDOT And AGC At Odds Over Highway Construction Zone Deaths

Last week the Associated General Contractors of America released a survey of its members on fatal crashes in highway construction zones. The results of the AGC survey are dramatically at odds with fatality figures put out by US Secretary of Transportation Ray LaHood. Secretary LaHood says construction zone crash deaths only involve construction workers 10% to 15% of the time, while the fatality is to a driver or passenger involved in the crash 85% to 90% of the time.

Two thirds of the contractors responding to the AGC survey reported their construction zones had experienced a fatal crash in the last 12 months, and a fifth of those reporting crashes said one of their workers was killed in the collision. The AGC survey concludes that construction zone crashes involve the death of a construction worker 18% of the time, while a driver or passenger is killed in the crash only 15% of the time. The other two thirds of the crashes in work zones are non-fatal.

Either way, there are far too many work zone deaths. Slow down when you see those orange barrels, people!

USDOT Announces TIFIA Loan Finalists

Transportation Secretary Ray LaHood has announced the five finalist projects whose loan guarantee applications will be considered this year under the federal Transportation Infrastructure Finance and Innovation Act. TIFIA is a program of federal government loan guarantees designed to provide incentives and lower interest rates for surface transportation projects which will generate tolls, user fees or other revenues to pay back investors over the life of the project. The five finalists are a $1.5 billion package of new toll roads and non-toll lane upgrades on Interstate 35W in Tarrant County, Texas; a $1.3 billion extension and additional lane widening for State Route 91 in Orange and Riverside Counties in California; a $960 million replacement for the Gerald Desmond Bridge in Long Beach; a $927 million conversion of high occupancy freeway lanes to toll lanes in northern Virginia; and a $140 million project to add bus rapid transit lanes to U. S Route 36 in Colorado.

The $4.83 billion in loan guarantees on the final projects represents a little over 37% of the $13 billion in guarantees sought on 26 proposals submitted for TIFIA guarantees in the 2012 round. According to Secretary LaHood, each dollar of federal subsidy leverages $10 in loan value under the TIFIA program.

Construction Businesses Not Stimulated? – Here’s Why

The 2009 “stimulus” legislation was touted as putting over $787 billion into the American economy over its duration, mostly through “shovel ready” infrastructure construction projects. Yet, in terms of economic activity and employment both, the construction industry lags significantly behind the overall economy three years after the measure was signed into law. What happened?

Funny math of government is what happened. Almost all of the “stimulus” appropriations represented money the federal government would have spent anyway, and subsequent cuts in federal construction programs have resulted in overall reductions in the amount of money federal agencies have spent on construction in the intervening years, compared to past spending levels. Remember, it’s Congress, not the president, which holds the purse strings.

Plans for federal government agency spending on construction in 2013, stimulus included, total about $709 billion, a 7.8% reduction from 2012 levels. Add in anticipated but as yet unplanned for emergency response spending, and the fiscal 2013 level may rise to as much as $712 billion, still a 7.4% reduction from the year before. What Congress gave with the left hand in 2009 it more than took away with the right hand in subsequent years. Go figure.

Senators Urge Postal Service To Delay Closings

Slash your budget, but don’t close any post offices. That’s the impossible message the United States Senate is sending to the United States Postal Service this week. Las week the Senate passed a bill revamping the postal service, and structuring financial reform of the quasi-governmental corporation. However, significant differences between the Senate passed measure and the House version still awaiting a floor vote could well delay any final legislative action well beyond May 15. That’s the date USPS proposes to resume closure of various post offices and mail distribution centers around the country under the ambitious USPS $22 billion cost cutting plan.

Four Senators have written USPS Postmaster General Patrick Donahoe asking USPS to hold off on any such closings until Congress can act – or putting it more bluntly – get its act together. “We believe an attempt to proceed with the planned closures to get ‘in under the wire’ while legislation to the contrary is being considered would be counterproductive and would violate the clear intent of the Senate,” according to the letter signed by Senators Scott Brown, Thomas Carper, Susan Collins and Joseph Lieberman. However, neither that letter nor the Senate bill explains how USPS is to achieve the needed cost savings in the absence of the proposed post office and mail center closings.

It’s a typical Congressional knee jerk reaction to every budget crisis: “Slash your expenses, Mr. Bureaucrat, but don’t cut jobs or services in my district.” Trouble is, even the dimmest bulb in the Capitol chandelier knows that is an impossible task. Welcome to Wonderland, Alice!

Connecticut Senator Joe Lieberman, one of the sponsors of the Senate passed bill which prohibits the planned closures, says his proposal will “remove some of the immediate financial pressure on the Postal Service” while “avoiding extreme changes that could further destabilize USPS.” What he means is that Congress now realizes it made a mistake in requiring USPS to prefund retired postal employee health benefits, since doing so has publicized one of the all time Ponzi scheme frauds of government accounting: the government promises expansive and expensive pensions and health benefits to retiring employees without putting away a dime to pay for them, or even reflecting the obligations on the government’s books.

This new Congressional requirement has meant USPS needed to put $21 billion in the bank over the last five years, resulting in USPS deficits skyrocketing from a mere $4 billion over that period to a total of $25 billion. Ouch! Think of it: every time you send an E-mail rather than a letter, you take away the money to pay for a few seconds of retired postal worker health benefits.

Postal employee unions are busy in the halls of the Capitol lobbying hard against both the House and Senate bills and the USPS austerity plan. All three would mean dramatic job losses and service cuts. The USPS proposal to drop Saturday mail deliveries would slash 80,000 jobs, at an annual savings of $2.7 billion. The unions are upset, and Congress wants to put off Saturday delivery cuts for at least 2 years. Nobody in the House or Senate has a plan to cover the $5.4 billion loss that would result, however.

Speaking about the pending legislative measures, National Postal Mail Handlers Union President John Hegarty says, “We’re not endorsing it whole-heartedly. We’ve come out in cautious support, recognizing there are still some improvements that need to be made.” Meaning: cut fewer jobs, bank more money for retirees. National Association of Letter Carriers Chief of Staff James Sauber is more sanguine: “We’re sort of disappointed … It’s sort of a missed opportunity, sort of tinkering around the edges.” American Postal Workers Union Executive Vice President Greg Bell characterizes the Senate measure like this, “It’s an improvement over the original bill, but we still have some issues.”

Among the issues Bell cites are proposals to cut compensation for work related injuries to federal employees, and to permit USPS to withdraw from the Federal Employees Health Benefits Program and set up a less expensive benefit for postal workers. Apparently the only thing most of the folks affected can agree on: cutting back compensation to upper level managers in the USPS, who now make considerably more than department secretaries in the Obama Cabinet.