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.”

Texas Facing Major Road Funding Woes

By 2015, Texas may be all out of money to keep highway construction abreast of population and job growth, according to Texas Department of Transportation CFO James Bess, who describes the perilous fiscal status of his agency as “entering into an era of uncertainty.” El Paso State Representative Joe Pickett echoes the concerns of Bess. “People don’t believe there’s a crisis because there are plenty of orange barrels. … How long before the borrowed money dissipates and we don’t have any more money to build?”

Apparently, the answer is the end of 2014. The Texas legislature has authorized TDOT to borrow $17.3 billion for transportation projects, but repayment will cost as much as $31.1 billion over 25 to 30 years. Nevertheless, TDOT will spend morrow than it is authorized to borrow in the next two years: $10.5 billion this year, and $9.3 billion next year. Of that total $19.8 billion, $6.7 billion is from one time sources that won’t be available in the future.

Texas motor fuel tax revenue – the state’s major funding source for road building – generates $2.6 billion annually, but the state needs $14 billion per year to keep up with population growth. Part of the problem has been the penchant of legislators over the years to raid highway funds for fire and police salaries and operating expenses, and now that big chicken is coming home to roost. One proposal is to raise auto and truck license plate fees by $50 per year, but that would hardly fill the budget gap. Even in Texas there aren’t half a billion cars and trucks.

If you plan to drive through Texas in the future, make sure you have a good spare tire. You will probably run into lots of potholes.

Pennsylvania Legislature Passes Public/Private Transportation Bill

Saturday, June 30, Pennsylvania’s legislature passed and sent to Governor Tom Corbett a measure setting up a seven member state panel to approve transportation projects funded by a mixture of public and private money. Though the bill, if signed into law, would make Pennsylvania the thirty-third state to have such a law on the books, it does nothing to solve the state’s road funding budget deficit which leaves Pennsylvania with over 5,000 structurally deficient bridges and 8,000 miles, or 26% of state highways, in very poor condition.

The bill is designed to permit private companies to propose “capacity enhancing” projects like adding variable toll “congestion relief” lanes to interstate highways, where tolls could be factored on number of vehicle occupants and level of traffic congestion in the neighboring free road lanes. The bill specifically prohibits leasing the Pennsylvania Turnpike to a private toll operator, without separate legislative approval. Pennsylvania State Representative Richard Geist predicts that the measure will promote creation of additional construction jobs in the state despite the road building budget deficit, while opponent State Representative Steve Santarsiero argues that the bill will take away taxpayer control of road building priorities in the state. A Santarsiero sponsored amendment which would have required construction companies working on projects approved under the measure to give hiring preference to Pennsylvania workers, and use steel produced in Pennsylvania mills, was defeated.

Governor Corbett has not proposed any revenue raisers to address the crumbling roads and bridges across his state, or to close the state’s $3.5 billion annual transportation budget shortfall.

Michigan’s Bridge Monopoly Battle Rages On

With monumental assistance from allies in Michigan’s legislature, Grosse Pointe billionaire Manuel Moroun continues his fight to maintain his private bridge monopoly on truck traffic and truck toll revenue between Windsor and Detroit. Wednesday, June 13, the Michigan House Appropriations Committee approved a bill to prohibit Governor Rick Snyder from using money from Michigan’s Strategy Fund to pay for any part of construction of a competing freeway to freeway bridge project two miles downstream from Moroun’s Ambassador Bridge. The Ambassador Bridge is the only existing highway bridge crossing the Detroit River between Detroit and Windsor, and Moroun collects all those truck and auto tolls.

In the last two legislative sessions, bills passed which prohibit Michigan’s Department of Transportation from spending any money on new Detroit River bridge construction, but Moroun wanted to make sure the Strategy Fund’s economic development money was also cut off as a source of funding for any competing bridge. He is also circulating petitions to put a state constitutional amendment on the ballot requiring a public vote before any competing bridge could be built. Over the last few years, the Moroun family has also donated about half a million dollars in campaign funds to federal candidates who have consistently opposed federal funding of new Detroit River bridge construction.

Despite this unprecedented example of self-interested lobbying, Governor Snyder will announce today a proposal, backed by Canada’s government and U.S. officials, for construction of the downriver New International Trade Crossing which would sidestep Michigan’s legislative funding restrictions Moroun has lobbied so diligently for. The proposed new $1 billion bridge and $2 billion attached bridge end customs plazas, would be paid for by privately collected toll revenues from bridge traffic, and by Canadian and U.S. federal contributions to customs facility construction. No funds would come from Michigan’s state coffers, Snyder promises.

Snyder is already authorized under Michigan’s Urban Cooperation Act to participate with Canada and the U.S. federal government in an international bridge authority which could fund the bridge, contract for its construction and operation, and arrange a private contract for toll collection. Canada has offered to advance Michigan’s $550 million share of construction costs against Michigan’s portion of toll revenue from truck and auto traffic over the new bridge. Besides the construction jobs and permanent operating jobs created by the new span, Michigan’s gross domestic product should increase by $2.2 billion annually from traffic across the new bridge, with new state and local tax revenues rising by $400 million each year, and Michigan personal incomes going up by $4 billion.

Given these prodigious improvements in Michigan’s economic quality of life from construction of the proposed new span, it becomes clear that Moroun’s political campaign fund donations are the only real reason for state and federal elected officials’ opposition to the project.

Wyoming Legislators Want The Road Repair Purse Strings Back

Recognizing that dramatically reduced federal funding of highway construction will mean there isn’t enough cash to pay for all of the state’s planned road repair and construction projects, Wyoming legislators are moving ahead with drafting of legislative proposals to take away the authority of the state’s appointed Transportation Commission for setting prioroties among the highway projects competing for scarce resources. Legislators expect to be asked to increase Wyoming motor fuel taxes, and if they do, they want more specific control of where in their state the money gets spent.

Despite warnings from some Senators about unintended consequences of legislative intervention in scarce resource allocation, the Joint Transportation, Highways and Military Affairs Interim Committee voted Wednesday to proceed with revision of the priority setting authority of the non-partisan Transportation Commission. In blatant recognition that a major pillar of political power in their districts is the ability to allocate funds to local projects, legislators’ votes overlooked warnings stemming from legislative interference earlier this year with project priorities set by the state’s School Facilities Commission.

Describing school construction priority setting this spring as a “fiasco,” Sheridan Senator Jonathan Botten said, “We had to compromise and we ended up spending a whole lot more money than what was originally intended.” The other side of the intra-government power struggle is reflected by Thermopolis Representative Lorraine Quarterberg’s remark that if the fuel tax is increased, residents and elected officials have a right to be more involved in deciding where the money is going.

Apparently Wyoming legislators have forgotten that politicization of spending decisions was the reason the Transportation Commission and School Facilities Commission were set up in the first place.

Chicago Area Road Funding Cut 16.3%

Money for repair and reconstruction of state maintained roads in the Chicago area will be cut 16.3% for the next six years, according to the IDOT austerity surface transportation plan released Monday, April 30. Last year’s six year IDOT plan for 2012-2017 called for spending $4.5 billion on Chicago area roads and highways, but the new IDOT plan for 2012-2018 cuts that figure to $3.6 billion, mostly as a result of federal matching fund cuts and future Highway Trust Fund legislation uncertainty in Congress. Statewide highway funding in the new plan has been cut from $11.5 billion to $9.2 billion for the same reasons. The only bright spot in the plan is the $12 billion in Tollway spending projected over the next 15 years, funded by the recently implemented 87.5% increase in toll charges.

The Tollway spending binge will mostly go to pay for construction of an interchange between I-294 and I-57 in Cook County, and construction of the Elgin-O’Hare Expressway extension and western bypass. Stalled in the engineering and environmental review process, for lack of construction funding, is the project to rebuild the I-290/I-90/I-94 interchange near the University of Illinois Circle Campus, affectionately known as the “spaghetti bowl.”

According to IDOT spokesman Guy Tridgell, The austerity budget is expected to result in reduction of the percentage of Illinois roads rated as “acceptable” from 88% to 60%, while IDOT hopes to keep the bridge rating, currently 92%, above the 90% mark despite overall budget cuts. “There will be an emphasis on keeping the bridge rating … over 90%, … [but] we will see a decline in the overall rating on roads,” Tridgell said.

Minnesota DOT Accelerates St. Croix River Bridge Schedule

Minnesota DOT Assistant Commissioner Jon Chiglo announced an accelerated schedule for construction of a new bridge over the St. Croix River south of Stillwater at the April 11, Oak Park Heights city council meeting. Chiglo says the bridge should open to traffic in the fall of 2016, a year earlier than older schedules anticipated.

The RFP for design of the bridge was released last month, and bids are due April 27. Designer selection should be completed by mid May, Chiglo announced. Oak Park Heights city officials want to move all utilities out of the approach road right of way before the new construction commences. According to council member Les Abrahamson, “It makes no sense to put a new roadway in over these aging sewer and water pipes.” However, the ability of the city to pay for utility relocation will depend on the determination whether or not the lines are “impacted” by the project. Without an impact determination, the city would have to bear 100% of the $6 million relocation costs. If the federal High Priority Program determines that the sewer and water relocation is needed due to the federal highway impact, then the United States will pay $5 million towards relocating the utilities.

Oak Park Heights city fathers are lobbying the Minnesota Senate for authority to offset the city’s $1 million relocation expense from the regional fiscal disparities pool. The House version of bonding legislation for the project already includes the offset provision.

Elkhorn Contractor Defaults On Madison Area Interchange Project

According to Wisconsin DOT project engineer Adam Kopp, Mann Brothers, Inc. of Elkhorn stopped work for the winter break in mid December on the $6 million Fitchburg US 14 interchange project, and never came back to work when the spring highway building season opened. Heavy equipment on the job site is neatly lined up in rows, and the project subcontractors and material suppliers have not been paid. Hudson Insurance, the performance and payment bond surety on the project, is in negotiations with WISDOT over payment to subs and suppliers, and the hiring of a general contractor to complete the project.

Mann is also in default on county road projects on Routes A, J and ES in Walworth County. Walworth County Purchasing Manager Peggy Watson said her projects are stalled and the County is “having the bond company work through the issues.” Neither Walworth County nor WISDOT has yet determined whether to have Mann continue as general with financing from the bonding company, or to mobilize a replacement general contractor at the bonding company’s expense.

Mann Brothers was founded in Elkhorn in 1920 when Lawrence Mann and his sons trapped and sold 85 wild mink, and used the proceeds as down payments on a Caterpillar bulldozer and a ton and a half dump truck. In 1932 ownership passed to the second generation, and then to the third generation in 1982 under the leadership of Richard Mann. Fourth generation owner David Mann has overseen rapid expansion of the company, apparently stretching corporate finances to the point where the downturn in the construction economy has taken its toll on the company’s ability to pay subs and suppliers.

Seven Bridge Projects Halted By TriWest/Concreate Receivership

Pulling the plug on months of failed workout negotiations, Bank of Nova Scotia has forced Concreate USL, Ltd. and Concreate’s new owner TriWest Construction into receivership in Ontario Superior Court under the administration of accounting firm Grant Thornton. The receivership proceedings involve a steel fabricator owed $4.75 million on the Strandherd-Armstrong Bridge in Ottawa, bonded by surety Guarantee Company of North America, as well as numerous projects bonded by Travelers.

Work on the Strandherd-Armstrong bridge and six bridges spanning the Queen Elizabeth Waterway has been stalled by the court proceedings. The fabricator on the Strandherd-Armstrong bridge has refused to ship any more steel to the site until it gets paid.

Guarantee Company of North America holds bonds for over $23 million on Concreate/TriWest projects, and Travelers holds more than $52 million in bonds on the stalled construction projects. Bank of Nova Scotia lent $34 million to Concreate/Tri West in February, 2011 on the strength of a capital infusion by TriWest when it bought Concreate in January of the same year.  According to court filings by Travelers on April 10, 2012, Travelers claims the sale of Concreate to TriWest was done in violation of Concreate’s indemnity agreements with Travelers.

Concreate was founded in the 1970’s, and moved to Ontario in 1983. During the last 15 years Concreate has expanded its operations from shotcrete bridge repairs to include new bridge construction, post tension water reservoirs, skateboard parks, and bobsled and luge tracks. While the January 2011 sale to TriWest and the February, 2011 Bank of Nova Scotia loan were supposed to improve Concreate’s financial strength, receivership filings indicate TriWest took $15.4 million in writedowns on construction contracts after the bank loan was made, causing Bank of Nova Scotia to call the loan, and initiate the receivership when Concreate and TriWest could not make the payment.

At this juncture, it seems unlikely that Travelers, Bank of Nova Scotia, Guarantee Company of North America and the unpaid subs and suppliers will sort out their differences in time for any of the seven stalled bridge projects to meet their current contractual completion dates.

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.

“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.”

Wisconsin Also Robs Peter To Pay Paul

Government funds set asied for specific purposes aren't really set aside for specific purposes, we are learning this week. Governor Jim Doyle and the Wisconsin state legislature balanced that state's budget by dipping into 'segregated" funds to the tune of nearly $240 million, including $65.8 million from the Transportation Fund. No wonder the construction industry is in such dire straits.

Illinois Budget Stalemate Delaying Stimulus Projects

Illinois has joined the ranks of states where legislative stalemates over capital improvement budgets are stalling the spending of stimulus dollars which could be creating jobs for contractors, subcontractors and material suppliers in the construction industry. As much as $39 billion in federal cash slated for "shovel ready" highway projects in Illinois, without any state matching funds, is nevertheless being held up due to the failure of the state legislature to pass a budget Governor Quinn will sign. Without a budget bill signed by the governor, the state Comptroller can't cut checks to pay road contractors, and although the Illinois Department of Transportation is already beginning to award contracts for some of the stimulus funded projects, DOT will not issue notices to proceed until the budget is signed into law, because DOT wouldn't be able to process contractor pay applications unless the Comptroller is authorized to issue checks to pay for the work.

According to IDOT spokesperson Paris Ervin, "If the legislature sent the governor a budget he agreed with we wouldn't be in this situation." The legislature will reconvene in special session on June 23, but because the regular legislative term has already ended, passage of any budget measure now will require a supermajority vote in favor of the bill.

Highway Reauthorization Stalls Over Funding

Despite the statements by House Transportation and Infrastructure Chairman James Oberstar, Ranking Member John Mica, Highways and Transit Subcommittee Chairman Peter Fazio and Ranking Member John Duncan that the four have agreed on the "major parameters of a surface transportation reauthorization bill which they hope will total between $450 and $500 billion for highways and mass transit, they can't agree on where the money will be coming from. Oberstar wants to increase fuel taxes, but increases in gas and diesel taxes are opposed by Mica and Transportation Secretary Ray LaHood. Although Oberstar promises passage of a bill in June, the dispute over fuel taxes versus mileage taxes as a funding mechanism makes that prediction optimistic. Current funding legislation expires at the end of September.

Gasoline Tax Indexing Compromise Proposed

Yesterday Senate Environment and Public Works Chair Barbara Boxer proposed indexing the gasoline tax to inflation at a meeting of the Subcommittee on Transportation and Infrastructure, as compromise between the administration's resistance to gasoline tax increases, defended by Transportation Secretary Ray LaHood, and ranking member George Voinovich, who insists on a gas tax increase, which would be the first since 1993.

Legislators predict the need for investment of half a trillion dollars in highway and bridge construction over the next six years, and the gasoline tax will fall far short of raising that much money at present rates. LaHood said the administration had not considered indexing the tax to inflation, but would be open to evaluating the idea.

Indexing the tax to inflation would be good news for highway contractors, but bad news for others in the construction industry who would have to pay the tax but who get no direct benefit from the increased highway spending appropriations which would follow.

Transportation Reauthorization - More Funds For Highway and Transit Construction

House Transportation and Infrastructure Committee Chairman James Oberstar priced the forthcoming surface transportation reauthorization bill at approximately $500 billion over the next six years, saying he expects to have the legislation on the House floor at the beginning of June. The funding will include about $123 billion for mass transit construction and $377 billion for road and bridge construction, in addition to the funds already appropriated in the stimulus legislation.

In a speech to the American Public Transit Association, Oberstar criticized the fact that it takes the Federal Transit Administration 14 years to approve new mass transit construction projects, vowing to streamline procedures within that agency and "make the 21st century the bright age of mass transit."