Southeast Side Coal Gasification Cram Down Nears Success

Using a time honored end of session legislative sleight of hand, the south suburban Beemsterboer cousins have nearly completed a legislative mandate that natural gas customers across the state pay for an economically wasteful and environmentally risky coal gasification project to be built on some of the most polluted land in the state. All that stands between gas consumers and the certainty of pointless rate increases to pay for the Beemsterboer boondoggle is Governor Quinn’s signature on Senate Bill 3766, passed in a secretive maneuver late last week.

What Is The Project?

Chicago Clean Energy, LLC an Illinois limited liability company managed by officers of New York’s Leucadia National Corporation, proposes to build a $3 billion high sulfur coal gasification facility on the former LTV Steel coke battery site at 114^th and Burley on the east bank of the Calumet River on Chicago’s southeast side. The riverfront land is one of the most polluted brownfield sites in Illinois. Proponents of the project say it will produce 1,000 construction jobs and 200 permanent jobs in the depressed Lake Calumet neighborhood. The proposed facility would mix high sulfur Illinois mined coal with tar sand oil recovery waste to produce synthetic natural gas.

The Sierra Club and other environmental groups opposing construction of the facility point out that both the petroleum coke and a million tons of high sulfur coal annually feeding the facility would be piled in the open air on the north end of the site, contributing volatile organics and coal dust particulates to neighborhood air, and insoluble petroleum fractions and heavy metal pollution to the groundwater and the Calumet River. The proposed plant would draw a net 8 million gallons of water daily from the Calumet River.

The 140 acre site is owned by cousins Alan Beemsterboer of Orland Park, Steven Beemsterboer of Frankfort, and Simon Beemsterboer of South Holland, who operate and manage Calumet Transfer LLC on the property. They bought the property from bankrupt LTV Steel in December, 2002, for $850,000.00. At the time they operated a slag and ballast unloading facility across the river at the 106^th street dock through Indiana incorporated Beemsterboer Slag & Ballast.

What Are The Economics?

The type of high sulfur coal strip mined in Illinois can’t be burned directly in electric power plants here because even the best stack gas scrubbers won’t remove enough of the toxic products of combustion to prevent serious air pollution. Besides, today’s clean burning natural gas prices are low enough to compete with coal as a fuel for electric power generation. Sounds like an ideal set of circumstances for converting Illinois coal to synthetic natural gas, right?

Wrong! In order for Leucadia National to recover the $3 billion it says it will be investing in construction of the coal gasification facility through Chicago Clean Energy LLC, Leucadia will have to be able to sell the synthetic gas it produces to local gas utilities at a price guaranteed to be four times higher than current natural gas market prices, for the next 30 years. Ameren, People’s Gas and Nicor have been opposing the imposition of these legislatively inflated prices on them before the Illinois Commerce Commission, and last year the Commission sided with the gas utilities, refusing to impose the 2% per year gas rate increases on consumers, or increases of more than 1/3 at the end of the 30 years.

The only folks who would benefit from such a deal are the Beemsterboers and Leucadia.

How Did The Beemsterboers Sneak This Bill Through?

In the Illinois legislature, every bill is supposed to get three readings on the House floor on three separate days, and three readings on the Senate floor on three separate days, before any floor vote. That process is intended to give each Representative, Senator, affected constituent, and the general public plenty of time to read the legislation, figure out what is in it, and make their views known to legislative leaders before a new law is voted on. Controversy over proposed legislation is meant to be publicly aired and debated before new laws are passed. However, like much that happens in Illinois politics, the process has been corrupted by slick legislative maneuvers designed to keep public debate to a minimum by secretly passing the most controversial bills a night or two before the end of the session, and quietly sending a large package of sneaky bills to the Governor’s desk for his signature after the legislative session ends and all the news reporters have gone home for the summer.

Here’s how it works: Legislative leaders who want to sneak through controversial or unpopular bills will put a “place holder” bill in the hopper early in the legislative session. The “place holder” will be a seemingly innocuous, short measure with no controversial text, and a subject – say, clean energy - arguably related to the “real” bill. The “place holder” passes without debate through committees passes one house and gets two readings on the floor of the other house. Meanwhile, in secret late night meetings in the back rooms of the Capitol, and in Springfield bars and restaurants, lobbyists and legislative leaders hammer out the desired but unpopular, complex and lengthy text of the “real” bill they intend to pass.

At the last minute, usually one or two days before the end of the legislative session, the “place holder” is amended in the house that hasn’t passed it yet, by “deleting everything after the enacting clause” and substituting the secretly crafted and already vote counted mystery text of the “real” proposed law. The bill passes in that house, and a vote of concurrence in the amendment is taken minutes later in the other house, and off the secret text of the legislation goes to the Governor’s desk without a peep from the press or the public. This is stealth legislation at its finest.

Here’s how everything went down in this particular case: On February 10, 2012, SB 3766 the “place holder” was introduced. This version directed the ICC to have its Office of Retail Market Development prepare a study and report to a joint legislative committee and the Governor on municipal aggregation in the natural gas market – sounds innocuous. The first reading in the Senate was the same day. March 27, 2012, was the second reading and addition of a floor amendment permitting gas utilities to include transportation charges on their bills for piping gas bought from other sellers to homes or businesses. Another red herring. The bill as thus amended had its third reading in the Senate on March 29, 2012, and passed the Senate.

Over in the House, the Senate passed bill as amended so far had its first House reading the very same day it passed the Senate. The entire month of April and most of May went by with no publicly apparent action on this seemingly innocuous bill. Then as the final hours and minutes of the legislative session ticked away, the heretofore secret “real” bill forcing Ameren, Peoples Gas and Nicor to accept the 30 year inflated price synthetic gas purchase contracts they successfully resisted last year before the ICC materialized May 30 as House Committee Amendment No.1. May 30 the House second reading took place, and May 31 the “real” bill passed the House on the third reading. The same day the Senate voted to concur in the House amendment gutting the entire text of SB3766 and replacing it with the 30 year inflated price synthetic gas purchase mandate.

The “real” bill, now passed by both houses after seeing the light of day for only a little over 24 hours, is now on Governor Quinn’s desk. Nothing but his veto pen stands between gas utility customers and guaranteed rate increases for the next 30 years. Let him know now how you feel about that.

Construction Industry Faces Yet Another Legislative Hit

In addition to putting on the hair shirt for GSA’s sins of excess in Las Vegas, the already reeling construction industry is expected to take the flogging for enduring federal fiscal irresponsibility.  The biggest casualty of the ongoing war of words between the Obama administration and House Budget Committee chairman Paul Ryan remains the unemployment strapped construction sector of the American economy.

While the fiscal 2013 legislative appropriations process is barely off the ground, the writing is already on the wall for American construction. Cuts of 36% in transportation construction spending, and 10% in water resources infrastructure spending are embedded in the House budget resolution. Failure of Congress to pass any long term reauthorization of the federal Highway Trust Fund for President Obama’s entire term is emblematic of the leadership vacuum in Washington, D.C.

Despite the loud professions of both political parties’ elected leaders that they want to reinvigorate the U. S. economy, it is very clear none of them has a single clue how to go about doing that.

Federal Budget Legislation – Lines In the Sand

The gulf between the House passed budget plan and President Obama’s speech to the Associated Press in response represents the same sort of gridlock which has prevented any sort of legislative solution to America’s fiscal problems during Obama’s first term: Republicans seek to slash the size of the federal government by cutting expenditures and cutting revenue, while the Obama administration seeks to eventually balance the federal budget by cutting expenditures and increasing revenue. It’s election year politics at its worst.

President Obama castigates the House budget plan as “thinly veiled social Darwinism,” pointing out that the House bill reduces the deficit by $5.3 trillion over ten years, while “spending” $4.6 trillion on lower tax rates for millionaires in the same decade. Meanwhile, the Senate has not passed any budget at all for the last three years. The irresponsibility of our elected leaders from both political parties, in their refusal to work towards compromise, and use of the budget process to create political talking points rather than solutions to national problems, is simply mortifying.

Congress Slaps Another Band Aid On The Hemorrhaging Highway Trust Fund

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

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

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

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

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

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

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

What Does A Pothole In A River Look Like?

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

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

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

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

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

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

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

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

Senate Highway Trust Fund Bill Scrapped By House Leadership

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

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

House Once Again Stymies Highway Trust Fund Reauthorization

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

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

GOP Budget Plan Draws Sharp Battle Lines

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

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

Senate Passes Highway Trust Fund Reauthorization Measure

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

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

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

U S House Moving Towards Senate Version of Highway Bill

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

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

Federal Construction Budget Tradeoffs

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

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

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

Obama’s Jobs Speech

Thursday evening September 8 at 7 p.m. Washington D. C. time President Obama will speak to a joint session of Congress about initiatives he is proposing to put 25.4 million unemployed and underemployed Americans back to work in a growing economy. Outside Obama’s senior staff no one is exactly certain what his proposals will include, but we expect to hear him talk about the following, not necessarily in the order presented here:

Construction Industry

About half of the Obama Administration proposals will be aimed directly at the ultra-high unemployment among skilled construction tradespeople:

FAA Reauthorization

The current temporary reauthorization of funding for the FAA expires September 16. When Congressman John Mica forced a shutdown of FAA runway and tower construction projects, that Congressional action stopped work on $2.5 billion of infrastructure construction until Transportation Secretary LaHood pushed through emergency legislation to put tradespeople back to work on these projects. The money to pay these workers will stop flowing again on September 17 unless a clean FAA reauthorization bill is enacted and signed into law by then, or another temporary extension is passed.

Surface Transportation Reauthorization

There has not been the customary six year Highway Trust Fund reauthorization since Obama took office. Instead, highway, water and rail transportation infrastructure construction across the country has been financed by a series of three and six month temporary extensions. Some of the slack has been taken up by stimulus appropriations, but the stimulus was intended to add to, not substitute for, regular surface transportation initiatives, and as a result, the economy has not been stimulated.

House Republicans on the Transportation and Infrastructure Committee are proposing to slash the level of appropriations from past legislation by more than half. Look for Obama to seek $550 billion in appropriations over the next six years, rather than the $230 billion Republican six year proposal.

Infrastructure Bank

The idea of a federal infrastructure bank to draw private investment into toll highway, rail and port facility construction – projects in which private investors could earn a reasonable return on their investment – has succeeded in facilitating infrastructure construction in Europe and elsewhere. This is a pet project of the Obama administration, plus there are two versions of proposals already put forward by Senator John Kerry (D. Mass.) – who proposes a $10 billion federal start up appropriation – and Representative Rosa DeLauro (D. Conn.) - who proposes $25 billion in federal seed money. Both versions would include investments in highway, rail, waterway, drinking water and sewage treatment, and energy projects. DeLauro’s version would also include broadband communications construction.

Commercial Building Retrofits

Another proposal which has been the subject of Obama administration trial balloons lately is the idea of a tax incentive to promote private investment in retrofitting existing commercial buildings for greater energy efficiency. This would put thousands of skilled tradespeople back to work without any direct federal expenditure, and would bring millions of private dollars now on the sidelines back into our economy. Also, it has the additional factor of appealing to Republicans, who are more likely to support an initiative that looks like a tax cut for business. Apparently Obama’s Jobs and Competitiveness Council is behind this proposal.

School Building Renovations

This proposal will be buried in the middle of the speech somewhere. Obama is always an advocate for improving the education systems of America, but because this particular initiative would involve new direct federal expenditures, it will likely draw strong opposition from across the aisle.

Broadband Tower Construction

While the stimulus early in Obama’s term appropriated a great deal of cash for studying the broadband needs of unserved and underserved areas of the nation, there has not been a lot of actual communication tower construction with those funds. Only about 68% of U. S. land area is currently covered by broadband communication networks – Obama will seek expansion of that coverage to 98%. This is another program which could bring private investment into play with minimal direct federal expenditures, as revenue from broadband users could ultimately repay investors for most of the cost of connecting outlying populations to cable TV and the internet.

Power Grid Modernization

This has been another favorite of Obama’s, as part of his alternative energy initiatives and climate change reduction legislation. Of course, power grid modernization should also attract considerable private investment from utility companies if the right incentives are enacted. And, significant segments of the skilled construction trades would be put back to work should power grid construction expand significantly. The massive outages on the east coast from recent storm damage will highlight the need for this sort of infrastructure investment.

Local Construction Initiatives

You may not hear anything about this one in Obama’s speech, but Representative Judy Biggert (R. Ill. 13^th District) announced a couple weeks ago that Veterans Administration Secretary Eric Shinseki has approved construction to transform the old Silver Cross Hospital building in Joliet, Illinois into a 60,000 s.f. VA outpatient clinic to serve the growing south suburban population of returning veterans. Silver Cross is moving into a new hospital facility in New Lenox.

Other Obama Proposals

Of course the construction industry won’t be the president’s only target for economic improvement. His speech will likely also include initiatives like tax incentives, direct federal expenditures, and cutting red tape to improve the economic competitiveness of American private enterprise. In the tax incentive category, look for proposals to extend the temporary 2% reduction in payroll tax rates; a tax credit for putting new employees on company payrolls; and an additional tax credit for hiring returning armed forces veterans. Proposed direct federal expenditures could include further extension of unemployment benefits for out of work Americans; assistance to local school districts for hiring more teachers; and specialized job training programs aimed at the long term unemployed. Finally, in the competitiveness category, we expect Obama to push ratification of three pending free trade treaties; and improvements in patent law to speed up commercialization of new American inventions.

Get Ready For The Construction Industry Unemployment Devastation Act

House Transportation and Infrastructure Chairman John Mica will call it the six year highway trust fund reauthorization legislation, but that will be a completely inappropriate title for the bill. Today Mica is expected to introduce a six year reauthorization package that will slash funding for roads, bridges and other infrastructure from past levels down to $230 billion over six years. If Mica’s version of the bill passes the House, it will collide with Senator Barbara Boxer’s expected version, which is predicted to call for funding at the level of $550 billion over six years.

Why am I calling this the “Construction Industry Unemployment Devastation Act?” Here is the arithmetic: Last fall, a panel of 80 experts on American infrastructure, headed by former Secretaries of Transportation Norman Mineta and Sam Skinner, concluded that maintaining U. S. infrastructure and meeting the needs of population growth should require investment of $262 billion each year, or a total of $1.57 trillion over six years. Senator Boxer’s bill is expected to propose about $550 billion over six years, or about 35% of the need. Mica’s bill which should come out today, will call for a mere $230 billion over six years, or just over 14.6% of the need. OUCH!!

Even the modest Boxer proposal would need an infusion of $12 billion, or $2 billion each year, from general federal revenues to make up for declining motor fuel consumption and a resulting shortfall in motor fuel tax revenue.

What this means for employment in the construction industry is that tradesmen who once worked for industry behemoths like Walsh, Bechtel or AMEC Morse Diesel will have to move overseas, or find work on crews remodeling houses, and the tradesmen now working in the home remodeling segment will end up at the unemployment office. It’s not a pretty picture, and the artists are those Republicans in the House who will do everything in their power to destroy any chance the Obama administration has of reviving the American economy before the 2012 elections.

Politics Is Strangling Infrastructure Bank Legislation

Early last September, the Obama White House proposed a Federal Infrastructure Bank, which the construction industry hoped would bring a much needed infusion of private capital into more “shovel ready” projects, and help in starting a resurgence of the severely depressed construction sector of the American economy. Well, the shovels are still ready, but the infrastructure bank concept, like so many legislative initiatives for creating jobs, is mired in the politics of spending cuts and debt reduction.

The Obama Administration’s original proposal was creation of a permanent federal infrastructure bank, which would use grants, loans and loan guarantees to attract state and local funding, and private investment, to revenue generating transportation infrastructure construction projects. According to the September 9, 2010 White House press release, the proposed infrastructure bank would be:

“…an important departure from the federal government’s traditional way of spending on infrastructure through earmarks and formula based grants that are allocated more by geography and politics than demonstrated value. Instead, the Bank will base its investment decisions on clear analytical measures of performance, competing projects against each other to determine which will produce the greatest return for American taxpayers.”

Of course, that overt threat to end Congressional earmarks against the Highway Trust Fund probably assured the death of the infrastructure bank proposal from the Obama Administration. As a result, Obama’s February 14, 2011 budget message phrased the concept a little more elegantly:

“A cornerstone of the I-Bank’s approach will be a rigorous project comparison method that transparently measures which projects offer the biggest value to taxpayers and our economy. This marks a substantial departure from the practice of funding projects based on more narrow considerations.”

So, unlike the Obama Better Buildings Initiative, which has never even been introduced in the form of legislation, the infrastructure bank concept has at least left the starting blocks, in the form of SB 652, the BUILD Act, and SB 936, the AIIF Act. Neither piece of proposed legislation has even made it over the first hurdle, though.

Unfortunately, Senator Kerry's 57 page Building and Upgrading Infrastructure for Long-Term Development Act, Senate Bill 652, is bottled up since March 17 in the Senate Finance Committee, while Senator Rockefeller's 67 page American Infrastructure Investment Fund Act, Senate Bill 936, is bottled up since May 10 in the Senate Commerce, Science and Transportation Committee. Neither proposal is going anywhere, in my estimation, until two conditions are met: 1) our political leaders finish their cat fight over increasing the debt limit and reducing federal spending; and 2) someone proposes to support the federal highway trust fund with a source of infrastructure funding revenue as an addition to, or an alternative to, the current motor fuel tax.

The breakdown last week of the debt limit negotiations, and the Republican refusal to consider any new taxes, likely sound the death knell to both SB 652 and SB 936. In the absence of a massive letter writing campaign from construction businesses in favor of one or both of these proposals, there isn't going to be an Infrastructure Bank set up any time soon. If you would like to see an Infrastructure Bank get moving, write to your own Senators, and to members of the Senate Commerce Committee and members of the Senate Finance Committee in support of it.

Biggert Continues Her Assault On The Construction Industry

Continuing her direct attack against any potential for recovery of new housing construction in America any time soon, 13th District Republican Representative Judy Biggert succeeded this morning in securing House passage of the fourth in a series of separate bills she cosponsored, terminating programs which provide relief to homeowners plagued by the economic crisis. Biggert is a cosponsor of HR 830, the FHA Refinance Program Termination Act, and HR 836, the Emergency Mortgage Relief Termination Act, passed by the House and sent to the Senate Banking Committee March 14, as well as HR 861, the Neighborhood Stabilization Program Termination Act, passed in the House March 17 and sent to the Senate Banking Committee. This morning the House also passed HR 839, the Home Affordable Modification Program Termination Act, cosponsored by Biggert, which will go to the same Senate Banking Committee.

Under Biggert’s leadership, the House has now succeeded in pushing through bills to completely gut all the programs in the Obama Administration stimulus legislation which gave some hope of stabilizing the tottering housing market, and stemming the bleeding in the housing start statistics so critical to recovery of jobs and activity in the construction industry. The fate of these critical programs is now in the hands of the 10 Republican, 12 Democrat Senate Committee on Banking, Housing and Urban Affairs. The Democratic members are Chairman Tim Johnson of South Dakota, and Senators Jack Reed of Rhode Island, Charles Schumer of New York, Robert Mendez of New Jersey, Daniel Akaka of Hawaii, Sherrod Brown of Ohio, Jon Tester of Montana, Herb Kohl of Wisconsin, Mark Warner of Virginia, Jeff Merkley of Oregon, Michael Bennet of Colorado and Kay Hagan of North Carolina. Republicans serving on the committee include Ranking Member Richard Shelby of Alabama, and Senators Mark Crapo of Idaho, Bob Corker of Tennessee, Jim DeMint of South Carolina, David Vitter of Louisiana, Mike Johanns of Nebraska, Patrick Tooney of Pennsylvania, Mark Kirk of Illinois, Jerry Moran of Kansas, and Roger Wicker of Mississippi.

While pundits predict all four bills will die in the Senate, or be vetoed by President Obama in the unlikely event they do pass, it is incumbent on every voter whose economic progress depends in any way on recovery of the construction segment of our economy to get in touch with the members of the Senate Banking Committee and let them know how important it is to construction companies and construction workers to see that this destructive legislation never reaches the Senate floor.

Republican “Green” Legislation

Sitting on President Obama’s oval office desk for the past 5 days is a piece of legislation described by House and Senate Republicans as “green” legislation to create cutting edge energy conservation technology jobs. Called the Federal Buildings Personnel Training Act, and designated HR 5112 in the House and S 3250 in the Senate, the bill is supposed to cut federal government energy costs and train the federal building maintenance work force in the use of high performance technologies for energy conservation in federal buildings.

About 97% of federal office buildings use private contractors to maintain and manage the facilities, and according to House co-sponsors Judy Biggert (R-Ill.) and Russ Carnahan (R-Mo.), the legislation should cut the $7 billion spent annually on heating, cooling, powering and lighting federal facilities. GSA expects every dollar spent on training under this legislation to return $3.95 annually in energy cost savings. Senator Susan Collins (R-Me.), cosponsor of S 3250, quotes GSA as complaining that contractors responsible for managing federal facilities “lack qualified, well-trained people” to manage more than 500,000 federal buildings, structures, associated infrastructure and other physical assets in the U. S. and around the world.

The legislation was presented to Obama December 3, and awaits his signature. Interesting that the Republican climate change deniers were the ones to sponsor this bill in both houses. The stimulus legislation they have been complaining about for nearly 2 years appropriated $5.5 billion to GSA for upgrading energy efficiency of federal facilities, and ever since, GSA has been complaining that lack of proper expertise among facility operating personnel was a major roadblock in reaching federal government energy reduction goals. Once the bill is signed into law, training for the operators of the numerous federal buildings in the Chicago area should kick into high gear.

The New Republican Agenda

According to Republican Representatives heading back to Washington, D.C. after the election recess, their emphasis in Congress will be on job creation and economic recovery. Their first priority – making the Bush tax cute permanent. They expect Obama and the Democrats to cave in to this legislation. Ohio’s John Boehner, expected to be elected speaker once the lame duck Congress comes to a close, announced in a Wall Street Journal piece today that the next Speaker should take four immediate steps to restore voter confidence in the federal government: 1) no more earmarks for favorite projects in appropriations legislation; 2) no floor votes on legislation that has not been available on line to the public for at least three days; 3) no more unfocused, thousand page bills with spending priorities and policy changes buried in incomprehensible bureaucratic text; and 4) no more secret drafting of legislation in the Speaker’s office rather than through the open committee hearing process.

Call me a cynic, but I expect if Boehner is elected speaker, his adherence to these four principals will last just until the first House Bill in the new congress comes to the floor for a vote. I hope he proves me wrong.

Unfinished Business In Congress

The Republican sweep to power in the House virtually assures that the unfinished business on the Obama administration agenda will not be finished any time soon. Most important to the construction industry is reauthorization of the federal highway trust fund, which Congress could not accomplish while both houses were under Democrat control. Now, unless the lame ducks get their tails in gear and pass a six year $500 billion reauthorization before Republicans take over in the House, it seems unlikely that anything good will come out of the next Congress for the construction industry.

Other construction related legislation likely to languish under Republican House leadership includes the Clean Energy and Security Act – also known as cap and trade, a public option for health insurance, the DREAM comprehensive immigration reform bill, and two bills designed to redirect unused TARP funds to infrastructure building: the Jobs for Main Street Act and the Small Business and Infrastructure Jobs Act. Any second infusion of federal stimulus dollars into the construction industry seems completely imaginary now.

Congressional Gridlock Makes Congress Look Silly

So far this congressional session, beginning in January 2009, the House of Representatives has passed 420 bills on which the Senate has failed to take any action one way or the other. The bills awaiting Senate action include many which would have salutary impact on the American economy, and some, like a bill requiring auditing of the $20 billion BP oil spill claim fund, which should be completely non-controversial. That’s one bill for nearly every Congressman which sits on a shelf awaiting action in the Senate. We should all be angry about this, and right now House members are angrier than most of us that their work is clogged up in Senate partisanship.