Scathing Federal IG Report Excoriates Silver Line Project Oversight

Echoing concerns of various Congressmen, Governors and the DOT Inspector General, U. S. Transportation Secretary Ray LaHood last week chimed in on the latest round of scandals surrounding the way the Metropolitan Washington Airport Authority is managing construction of the Silver Line rail link between Dulles International and downtown Washington, D.C. “I have serious questions about how the board has operated. I want the people of the D.C. area to know that we don’t agree with what they’ve been doing,” LaHood said. “The thing that really pushed me over the top with the board is when I read in the Examiner that they gave a former board member a contract. … I think it’s too much inside politics.” One wonders how much inside politics Secretary LaHood thinks would be just the right amount.

The Inspector General report LaHood mentioned details the MWAA board’s weak oversight of the Silver Line project, lax ethics, no-bid contracts, conflicts of interest, and lack of transparency. Confronted with taxpayer and toll payer funded board expenses including a $9,200.00 airline ticket to Prague, a $4,800.00 first class ticket to Hawaii, three $1,600.00 dinner tabs, and two bottles of $119.00 wine, board member Michael L. O’Reilly could only characterize the situation as “a public perception problem. … We’ve gotten better, but we haven’t gotten to the point where people are going to praise us for our frugality.” It seems in Washington, public perception is only troublesome when it is correct.

Secretary LaHood’s comments on the IG report deftly separated the professionalism of the MWAA Silver Line project staff from the excesses of the board. “I have a great deal of confidence in the executive director of MWAA,” LaHood remarked. “Jack Potter is doing a very, very professional job. He’s trying to clean up a mess, and I have confidence that he can carry off Phase 2 of the line.”

Chicago Landmarks Commission Stalls Prentice Hospital Preservation Hearing

Northwestern University Medical School’s shuttered Prentice Women’s Hospital on the city’s central lakeshore campus of the University may be considered a thing of beauty by architecture buffs, but the controversy over what to do with the outdated shell, empty for the last 5 years, is getting very ugly. The University wants to tear down the structure and replace it on the high priced lakefront site with a modern medical research facility. Preservationist groups and architecture aficionados claim the existing shell can be adapted to research use, and that this early example of groundbreaking hospital configuration – four open plan “villages of care” on each floor – should be kept around for posterity.

Designed by Chicago architect Bertrand Goldberg, the Prentice Women’s building is ranked 11 on the National Trust for Historic Places list of most endangered buildings worth preserving. Goldberg’s 1970’s design has since been emulated by hospitals all across the country, in efforts to humanize and sensitize interaction between patients and caregivers in the hospital setting. Sixty prominent architects have petitioned Mayor Rahm Emanuel to force the University to save the structure, and Mayor Emanuel has punted the issue over to Landmarks Commission chairman Rafael Leon. Northwestern has agreed to delay demolition plans until the Landmarks Commission holds a hearing on the matter, yet chairman Leon refuses to put the issue on his agenda, further delaying a resolution.

The hospital campus, situated on the city’s prime Gold Coast lakefront just north of Navy Pier, is the site of ongoing high priced construction projects funded by some very generous benefactors, whose names now adorn the facades of the hospital structures they have funded. Controversy over these developments, and the congestion they cause neighborhood residents, is nothing new – one of the latest contretemps involved the helicopter landing pad atop the new Lurie Children’s Hospital. The University needs to restore the empty Prentice site to useful purposes. Anyone who forgets that Mayor Emanuel is a Northwestern grad school class of 1985 alumnus is missing the point.

Road Construction Boom Provokes North Dakota Housing Shortage

Out of state contractors submitting low bids on the booming North Dakota highway construction project schedule are discovering that housing for their workers near the job sites is very scarce, and very expensive. North Dakota Highway Department Director of Construction Cal Gendreau says the number of out of state contractors working on projects for his agency is up 20% from the level six years ago. North Dakota awarded 103 out of a total of 192 bids on highway projects to out of state contractors this year.

For both in state and out of state road builders, the oil patch construction boom in the state is shrinking the housing supply and driving rental prices through the roof. Spokane’s Acme Construction won a bid on an $18 million road widening job, only to find no place for workers to live near the site. The company ended up purchasing land along the road it was widening, bringing in two heavy duty diesel generators, two mobile homes and a small village of fifth wheel campers, and hooking it all up to a 1,000 gallon sewage holding tank to make room for the crew. Oftedal Construction’s Project Manager Mike Schriner is running a $62 million road job through the Badlands, and reports similar worker housing woes: “We’ve got guys living in tents in Little Missouri State Park.” Schriner’s employer put one employee to work full time just finding places for crew members to live. Trailers in nearby communities rent for $1,550.00 per month.

Of course, North Dakota taxpayers are footing the bill for all this expensive temporary housing. North Dakota DOT’s Gendreau says, “We know they need to cover their housing expenses and it’s built into their bid.”

Scandal Plagued SNC Lavalin Poaches CH2M Hill Executive As Its CEO

Rocked by recent police raids on its corporate headquarters and the scandalous departure of three top executives, Canadian engineering giant SNC Lavalin yesterday named Robert G. Card, former CH2M Hill executive and former U. S. Energy undersecretary, as its new CEO. Card is just coming off leadership of the construction of London’s Olympic Games facilities and infrastructure, on time and on budget.

March 26 SNC Lavalin CEO Pierre Duhaime announced his decision to leave the CEO post, and retired from the company in June, in the aftermath of his approval of $56 million in payments of apparent bribes to overseas agents for the procurement of engineering business. Duhaime’s exit followed right after the departure of two senior executives involved in the company’s Libyan operations and possible involvement in a scheme to smuggle one of Muammar Gadhafi’s sons into Mexico. Following Duhaime’s announcement, Canadian Mounties raided SNC Lavalin’s Montreal offices seeking documents related to Libyan bribery schemes.

SNC Lavalin is the ninth largest design firm worldwide, and also has substantial at risk construction contracting operations around the globe.

Hydroelectric Power Opponents Face Federal Funding Cutoff

Environmental organizations opposing new hydroelectric dams or pursuing litigation seeking to tear down existing dams would lose all their federal funding under a bill introduced by Washington Congressman Doc Hastings. HR 6247, entitled “Saving Our Dame and New Hydropower Development and Jobs Act,” was introduced August 1 and referred to Hasting’s own House Natural Resources Committee and to Michigan Congressman Fred Upton’s Energy and Commerce Committee. Though any floor action on this bill will not likely take place until after the November elections, it already has the environmental groups it targets up in arms.

This simple 17 page legislative measure would strip all federal funding from regular dam construction opponents National Wildlife Federation, American Rivers and Trout Unlimited, which have received millions of taxpayer dollars in past years, and used that money to pay lawyers to bring lawsuits seeking to prevent new dam construction and also to tear down existing hydroelectric generating facilities. Natural Resources Committee spokesman Spencer Pederson describes the bill as “a policy statement about the importance of hydropower and how taxpayer dollars shouldn’t be used to destroy that resource.”

About 8% of American electricity is generated by hydroelectric facilities, with California having the largest number of power generating dams, and Washington having the largest overall hydroelectric generating capacity. California’s House Water and Power Subcommittee Chairman Tom McClintock has denounced American Rivers as an “extremist organization” in the past, and this new bill raises the ante on that remark, with American Rivers Senior Director of Government Relations Jim Bradley now calling HR 6247 “incredibly extreme.” Bradley says “it’s a little bit shocking for a member of Congress to create this kind of blacklist.”

Of course, dams are used for flood control and water conservation as well as power generation, especially in the western states. And the three groups targeted by this bill do have a history of going to court weighing in on the side of fish and other aquatic species whose habitats are affected by dam construction and operation. Nevertheless, the rhetoric already generated by introduction of this bill sounds more like election campaign talking points than serious policy debate. Only time will tell whether the measure ever gets out of the committees to which it has been referred.

Senate Finance Moves Forward On Energy Tax Credit Extension

Just before the summer recess in Congress was declared, the Senate Finance Committee passed a measure including a one year extension of production tax credits for wind and geothermal energy projects, making the incentive applicable to projects breaking ground any time until the end of 2013. The credit is set to expire at the end of 2012 unless both houses of Congress pass the measure, cobbled together by Senate Finance chairman Max Baucus and ranking member Orin Hatch. Reported out of the Senate Finance Committee on a bipartisan vote of 19-5, the bill includes a total of $205 billion in tax cut extensions for individuals and businesses.

While Committee passage of the bill is welcomed by energy businesses, some renewable energy advocates mourn that it does not go far enough. “A temporary tax provision I don’t think provides enough incentive for capital investment, and that’s what our industry needs,” according to Associated General Contractors of America Senior Executive Director of Governmental Affairs Jeff Shoaf.

American Council of Engineering Companies Vice President of Governmental Affairs Steve Hall, says the tax credits are “absolutely essential” for the health of the renewable energy economy.

The fate of this legislation when Congress reconvenes after the summer break is still uncertain. Tax credit extensions are just the first step in comprehensive reform of the Internal Revenue Code, and all such legislation may well be pushed back on the Congressional calendar until after the November elections. Furthermore, should some sort of tax cut extender bill get passed when Congress comes back into session, there will be heated debate over, and revisions to, the contents of this bill before anything reaches the Oval Office for signature.

Target Stores Files RICO Lawsuit Claiming Paving Fraud By Chicago Area Contractor

Target Stores has filed a civil lawsuit in federal court in Minneapolis under the Racketeering Influenced and Corrupt Organizations Act against Bridgeview based Rose Paving Company, LCH Pavement Consultants, United Paving Company, American Pavement Solutions, Asphalt Maintenance, Inc., and officers of several of the named companies, claiming that the defendants conspired to defraud Target of millions in a bid rigging and kickback scheme involving maintenance of parking lots at 1,700 Target stores across the country. Target alleges that LCH organized the participating paving contractors to divide up the $100 million worth of parking lot repair work by fraudulently inflating bids, agreeing to submit non-competitive prices on bids outside their corruptly designated territories, and requesting bids only from contractors in on the scheme.

Target also contends that participating paving contractors overbilled for work never actually performed, and charged for removal and replacement of asphalt all the way down to the substrate when the work done was only a surface overlay. The suit says Target was billed for and paid LCH for hundreds of thousands of dollars in work that was never done, and that LCH paid the contractors submitting false billings and then demanded kickbacks from them.

Store locations named in the complaint as being involved in the fraudulent billings include Target parking lots in Cicero and Lake Zurich. Other locations identified in the lawsuit include stores in California, Arizona, Montana, Virginia, Pennsylvania, Texas, Georgia and New York. Target claims the conspiracy began in 2009 and continued through 2012.

Sealed Court Conviction Left Trump’s Florida Deal To Go South

Records released last week by the U. S. Supreme Court reveal that when Brooklyn U. S. District Court Judge Leo Glasser sealed the record of Felix Sater’s conviction on a guilty plea to joining with crime syndicate members in cheating investors all across the country, while Sater awaited sentencing in the Brooklyn case, the secrecy order enabled Sater to bilk more than 100 other investors in Fort Lauderdale’s Trump International Hotel & Tower. The $200 million Las Olas Boulevard construction project now stands incomplete, empty, and chained off along Fort Lauderdale’s popular beachfront.

Joe Altschul, attorney for 75 of the bilked purchasers of units in the failed condominium hotel development explained why the Brooklyn court’s secrecy order aided in the fraud against his clients: “Each of these purchasers had a right to know who they were dealing with. It’s bad enough that they prop up Donald Trump as the developer, but then you find out that it’s not Trump but a convicted felon already charged in financial shenanigans.”

Briefs in the Supreme Court case contend that the Sater case is only one of many in the Eastern District of New York in which prosecutors get judges to seal conviction records of mobsters – records which should be public to protect other innocent investors considering putting money into deals with felons who have already pleaded guilty to financial fraud, but whose convictions the court keeps secret on the supposed basis of a need to protect the lives of crime figures cooperating in government investigations into mob activities. Lawyers involved in this particular case are especially miffed because in passing sentence Sater’s case Judge Glasser took a pass on the traditional measure of ordering Sater to make restitution to the folks he duped while secretly convicted on his guilty plea and awaiting sentencing. There’s nothing about that aspect of the case that could have contributed to avoiding a mob hit on Sater.

When prosecutors and the courts contribute to the ongoing frauds of criminals against the investing public, and then shirk responsibility for making whole the folks they are supposed to protect from mob activities, it makes honest people in the construction business wonder whose side these public officials are on.

Sater owns a $4.8 million condo on Fisher Island, and allegedly paid the mob $1.5 million to be let in on the Fort Lauderdale Trump project. One of the lawyers involved in the Supreme Court case which resulted in release of the sealed record of Sater’s conviction is former federal judge Paul Cassell, who blames Judge Glasser for not immediately making Sater’s guilty plea conviction public. “The court illegally gave away millions to a criminal,” Cassell says. Miami first Amendment lawyer Tom Julin agrees. “It’s the worst thing a court can do. In a day and age when economic crimes can affect massive amounts of people, there’s a real danger in super sealing these kinds of judicial proceedings.”

Senate Finance Committee Wimps Out On Tax Reform

Thursday’s meeting of the Senate Finance Committee was supposed to be this nation’s first step toward comprehensive reform of the Internal Revenue Code, attacking a list of 75 different special interest tax incentives that don’t really have anything at all to do with social policy – the usual justification for special interest benefits conferred by Congress through tax code loopholes. Instead, it turned out to be a clear demonstration of just how wimpy Senators can be when faced with taking away tax benefits for their own constituents.

Here are some of the specialized tax advantages that were on the agenda for termination, but ended up being retained in future tax years: 1) accelerated depreciation for capital improvements at NASCAR racetracks (wonder what the social policy behind that one could be?); 2) millions of dollars in rum tax rebates for Puerto Rico and the U. S. Virgin Islands (wonder which Senate Finance committee members drink daiquiris?); 3) economic development tax credits for StarKist’s tuna cannery in American Samoa; 4) tax credits of $2,500 for buyers of electric motorcycles and other low speed electric vehicles (the Senators did remove golf carts from the list of qualifying electric vehicles, though). Out of 75 special interest tax benefits on the termination agenda, the Senators could only agree that 20 were fit for elimination. Characterizing these moves as “more than baby steps,” Finance Chairman Max Baucus crowed “I’m proud of what we’ve done as a committee.”

Other committee members were somewhat more truthful in their remarks defending the small number of special interest perks removed from the tax code in the committee report, which won’t even get a vote in either house until mid September, when the six week summer recess concludes. Michigan Senator Debbie Stabenow candidly pleaded for the NASCAR accelerated depreciation as a job saver in her state: “Big tax reform is where we need to look at all this stuff,” she said. Meaning, let’s kick this can down the road until after the elections. Oklahoma Senator Tom Coburn was more candid. “Nobody wants to make the hard choices around here,” he intoned.

Bankruptcy Could Shutter 13.5% of Illinois’ Power Generating Capacity

Three months ago executives at Midwest Generation, operator of six coal fired electric power generating plants in Illinois, announced they were closing two of the plants in Chicago, as part of an environmental deal to avoid expensive stack gas cleaning installations at the creaky old facilities at the Fisk and Crawford plants. Earlier this week the same executives said they may not be able to keep their other four Illinois coal fired plants open, as low natural gas prices and resulting low rates for electricity threaten the company with bankruptcy.

Closing of the Fisk and Crawford plants as the company has agreed to do will put about 180 employees out of work. The six Midwest Generation plants provide electricity to power 5 million homes in the state, but the grid operator is obligated to keep supplying electricity to those customers even if all six plants are shuttered. Nevertheless, closing all six plants would throw 1,000 people out of work, and shut down 13.55 of the total power generation capacity in Illinois.

Midwest Generation’s parent Edison International says it will not provide financial support for Midwest. If Midwest filed for bankruptcy, as it is threatening to do, its bondholders would have to decide whether to keep the remaining plants in Romeoville, Joliet, Waukegan and Pekin open for business, by funding environmental upgrades Midwest does not have the cash to pay for, sell them, if a buyer could be found, or shut them down and abandon them. In any event, Midwest predicts it will default on a half billion dollar debt repayment due next June.

Company officials are in negotiations to restructure $3.7 billion in unsecured debt in order to avoid bankruptcy. Analysts predict Midwest’s cash flows will remain negative until at least 2016 without a sharp upturn in utility rates. Parent Edison International’s profits are down 46% from a year ago.

Highway Trust Fund Bill Tightens “Buy American” Requirements

In a small nod in the direction of workers at American steel mills and fabricators, and at other businesses manufacturing products for road building and mass transit use, Congress tightened up “buy American” requirements on projects partly paid for with federal tax dollars. The new bill eliminates one loophole in the buy American laws, which allowed use of foreign produced steel and manufactured products on portions of construction if a major project was split into multiple contracts or awarded in phases. Under the MAP-21 bill extending the Highway Trust Fund for 27 months, if any one of the split up contracts has federal money in it, all of the related products must also abide by the buy American rules.

And the new legislation also requires mass transit projects to publish a detailed explanation, with a public comment period, before waiving buy American rules for mass transit construction contracts. In past years, this waiver publication and comment requirement only applied to highway construction. Now, citizens will be able to know ahead of contract bidding why local transit officials find it necessary to use foreign made materials and products in their construction jobs. Seems like Congress is at long last wising up to the need to keep taxpayer funded job creation on American shores.

California High Speed Rail Details Emerging

Now that the California legislature has approved a $4.5 billion bond issue in order to claim $3.2 billion from federal taxpayers toward construction of a promised high speed rail link between Los Angeles and San Francisco, details of the difficulties faced in actually building the railroad tracks for these bullet trains are beginning to be released for public consumption. Here are just a few notes from detailed analysis of the proposed routing for the first 130 mile segment from Madera to Fresno, to be built at a cost of $2.6 billion out of the total budget of $68.4 billion for the entire project:

The California Department of Transportation anticipates it will cost $226 million and take three years to relocate a short stretch of highway 99 through Fresno where the roadway now nestles right up against the Union Pacific rail yards between Ashlan and Clinton Avenues. In order to make room for the bullet train tracks, 2.5 miles of the road will have to be torn up and replaced about 100 feet to the west, a frontage road will be built, along with 3 new Route 99 interchanges, and 50 private properties will be condemned and purchased by the state, displacing an assisted living facility, a mobile home park, a truck stop, an RV dealership, several motels, and two self storage facilities. The bullet train project budget will have to bear the cost of relocating all of these businesses.

According to plans of the high speed rail authority, 30% of the construction work on the project must be performed by small business subcontractors, and the authority is considering an additional requirement that one third of that goal, or 10% of the entire project budget, must be spent on work performed by minority and women owned businesses. In Chicago area government construction projects, the usual contract requirement is for 30% of the work to go to MBE/WBE trade subcontractors. It remains a puzzlement why California’s goals for disadvantaged business participation are so much lower.

Overall Construction Spending Rises Slightly

Commerce Department figures released yesterday point to strengthening home building as the driver for a slight overall increase of 0.4% in construction spending in June. May’s gain in overall construction spending was also revised upward to 1.6%. While employment in the construction sector of the U. S. economy still lags painfully behind many other recovering parts of the American economy, any signs of returning health in the construction sector are encouraging.

Overall construction spending now sits at a seasonally adjusted annual rate of $842.1 billion, up 12.9% from the February 2011 twelve year low. Nevertheless, current levels are only about half of what economists say is needed for healthy growth in construction. June’s overall construction numbers were driven upward by a 1.3% increase in housing construction, to an annual rate of $256.6 billion. Private nonresidential construction rose only 0.1% to $302.3 billion, with spending on office and hotel construction going up while shipping center construction declined.

Overall government construction spending is flat at $274.2 billion annually, with federal spending down 1.6% while state and local construction layouts are up a slight 0.2%. Though these numbers don’t signal any resounding strength in a construction industry recovery, in today’s struggling economy, any uptick is welcome.

Obama Administration Signs On To Six Month Congressional Budget Deal

In a statement signaling Obama administration agreement with the House and Senate deal for a six month continuing resolution to fund federal government agencies past the upcoming elections, White House Press Secretary Jay Carney also took the opportunity to let legislators know President Obama is not likely to agree to any 2013 budget cuts below the $1.047 trillion spending cap passed in last year’s Budget Control Act. Carney’s statement points out that while the administration welcomes the agreement, heading off massive layoff warnings to employees of federal government contractors, is a “welcome development,” but warns the president “has made clear that it is essential that the legislation to fund the government adheres to the funding levels agreed to by both parties last year, and not include ideological or extraneous policy riders.”

With the beginning of federal fiscal year 2013 less than two months away, the House has passed only six of the needed spending bills, with House Appropriations Committee approval of five more. There has been no action whatsoever on spending legislation in the Senate. Both houses will begin a six week summer recess days from now.

The continuing resolution will not be introduced or passed until Congress comes back into session in September, but the administration’s announcement of agreement with the deal between Speaker Boehner and Majority Leader Reid is certainly enough to let corporate lawyers at huge government contractors breathe more easily as they decide not to have their companies pass out WARN Act layoff notices to hundreds of thousands of their co-workers. The economic panic likely to have resulted from such mass notifications could not have helped either party in the upcoming Presidential and Congressional elections.

Our political leaders should all be severely embarrassed that it nearly always takes until the day before legal deadlines expire to get anything at all done in this gridlocked Washington D.C. political world, despite the fact that the agreed action is really helpful to citizens and constituents of both parties, and for the nation as a whole.