A Union Plan for Financing Construction

By STEVEN GREENHOUSE

The A.F.L.-C.I.O. said it would announce on Wednesday that it intends to work with pension fund managers to ensure that at least $10 billion in union pension money is made available in the next five years to finance infrastructure projects.

Richard L. Trumka, president of the labor federation, will present the plan at a meeting of the Clinton Global Initiative in Chicago as part of organized labor’s effort to get the federal government, banks and money managers to do more to issue bonds or create other mechanisms to finance infrastructure projects.

A.F.L.-C.I.O. officials said they planned to work with Deutsche Bank and other financial institutions in the hope of coming up with hundreds of millions of dollars to retrofit large commercial buildings. Many building owners are hesitating to do such retrofits because they are highly leveraged and do not have the cash to make the investments. The A.F.L.-C.I.O. hopes its $10 billion will provide an incentive for banks and hedge funds to develop financing vehicles to make such projects happen.

“America’s construction workers need work and want to work,” Mr. Trumka will say, according to his prepared remarks, noting that unemployment is 16 percent in the industry. “Never in modern times has so much construction work needed to be done.”

A.F.L.-C.I.O. officials said they also hoped their plan would help persuade Congress to create a National Infrastructure Bank or a program similar to the expired Build America Bonds program, in which the federal government subsidized bonds issued by states and municipalities to finance bridges, airports or other infrastructure. While labor unions and many Democrats support such measures to create jobs, many Republicans oppose them because they will increase federal spending.

Mr. Trumka also will announce that labor unions plan to invest at least $20 million in the next year in energy-efficient retrofits of commercial, industrial and public buildings. That should not be difficult, federation officials have said, because union funds invested $97 million last year in energy retrofits for public housing.

Mr. Trumka also will say that the A.F.L.-C.I.O. and building trades unions will work with community colleges and the government to train 40,000 new apprentices in specialty welding and other skills for energy-efficient projects. They will also seek to train 100,000 midcareer construction workers in new skills.

“The nation has over $2 trillion in infrastructure and social needs, and there is over $3 trillion in public sector pension funds,” said Randi Weingarten, president of the American Federation of Teachers and the leader of a group of public sector unions in the A.F.L.-C.I.O. that is studying the issue. “The question is, are there financially prudent ways to invest working men’s and women’s capital to create jobs and rebuild America’s infrastructure?”

Raids leave bridge, road funds in $3B hole – Motor fuel, licensing and other taxes for rebuilding infrastructure gets detour

By Brian Nearing

ALBANY — During the 2000 presidential campaign, the idea of a government “lockbox” became a recurring joke after Al Gore called for a way to keep Social Security taxes from being diverted to support other federal spending.

Here in New York, the state “lockbox” created to pay for rebuilding aging bridges and roads — a fund that’s augmented every time you buy gas, renew a driver’s license or rent a car — has been raided for cash by state leaders during the last decade to such an extent that it will need $3 billion in taxpayer bailouts over the next five years.

And those added billions won’t fuel a massive rebuilding, but will rather simply let a state with more than 2,000 structurally deficient bridges — more than one span in every 10 — keep chipping away at the problem.

Some highway advocates are questioning whether the Dedicated Highway and Bridge Trust Fund, created in 1991 as a reliable source of cash, may be too depleted to handle the job.

For every dollar that the fund will spend on roads and bridges over the next five years, it will spend almost $3 to cover rising debts and help run the state Transportation and Motor Vehicle departments, according to figures in Gov. Andrew Cuomo’s capital plan in the just-completed state budget for the 2011-12 fiscal year.

“It may have been created as a lockbox, but too many people have the key,” said Mike Elmendorf, president and CEO of Associated General Contractors of New York State, a statewide lobbying group that represents more than 600 construction and engineering firms. The group has warned for years that fiscal abuse would leave the fund short for roads and bridges. “Gov. Cuomo did not create this problem; it has been going on a long time.”

The governor’s outlook for the trust fund reflects the hard truth that ballooning debt and DOT/DMV costs will gobble up the lion’s share of its cash. Through 2017, taxes on gasoline and petroleum companies, fees for vehicle licenses and registration, car rentals and corporate and utility fees will generate more than $10 billion for the fund, along with the $3 billion bailout from taxpayers through the general fund.

“We have to face reality. … We have bridges that need to be fixed,” said state Sen. Betty Little, a Queensbury Republican who represents part of the Adirondacks, which has a greater share of deficient bridges compared to the rest of the state.

Her district includes the site of a new $70 million bridge at Crown Point. The Champlain Bridge was demolished after tests in 2009 revealed that the original 80-year-old structure faced imminent collapse.

Spending in the trust fund exceeds revenues and will continue to do so for years, forcing the bailouts, said Morris Peters, a spokesman for the state Budget Division.

It is surpassingly difficult to compare what the fund intends to spend over the next five years — about $3.4 billion — to what DOT believes the backlog of repairs could cost. Peters and DOT spokeswoman Deborah Sturm-Rausch both said there is no comprehensive cost estimate for restoring deficient bridges and roads.

In 2008, DOT announced it needed a five-year $25.8 billion “turnaround plan” for such work. Last year, DOT got $7 billion to cover two years, an amount Sturm-Rausch said is enough to keep the infrastructure functioning and safe.

Regardless, only about a quarter of the fund will actually go to roads and bridges (split roughly equally between repairs and new construction). If more money is needed, the fund is now hamstrung by the political decisions that committed cash elsewhere.

During the next five years, nearly $9 billion from the fund will repay debt for past projects — some more than a decade old — and cover DOT and DMV expenses for snow and ice removal, payroll and routine supplies.

Of that, about $4.7 billion will go toward repaying debt stemming from a refinancing deal set up by the Pataki administration in 2005. To immediately reduce debt payments and help balance his budget, Pataki refinanced a deal to pay no interest for five years. Now that debt balloon has popped, with annual debt payments owed by the fund jumping from about $600 million in 2010 to more than $900 million a year.

Operating expenses at DOT and DMV, which have been covered by the fund since 2001, will eat up another $4.2 billion over five years. Weaning DOT and DMV off the fund — Little is among the supporters of legislation to do just that — would immediately boost its resources, said Jay Simson, executive director of the American Council of Engineering Companies of New York, which represents civil engineering firms that build public and private projects.

“We have spoken to the governor on this,” he said. “This is a case for the state of paying for repairs now, or paying later. And it will be a lot more later.”

Schumer blasts Christie for axing Hudson tunnel

Firing a shot at Trenton, N.J., New York’s senior senator says Gov. Chris Christie’s move to scrap the trans-Hudson commuter rail project was a “terrible decision.”

by Jeremy Smerd

Sen. Charles Schumer said Tuesday that New Jersey Gov. Chris Christie made a “terrible, terrible decision” when he canceled a multi-billion dollar project to build a commuter tunnel under the Hudson River and accused the governor of “cannibalizing” ARC tunnel funding for his own state’s small-scale projects.

New York’s senior senator, speaking Tuesday at a Crain’s breakfast forum, said Mr. Christie’s proposal to redirect $1.8 billion worth of Port Authority of New York & New Jersey funds toward smaller road maintenance projects “would be a mistake that rivals, and perhaps even surpasses the cancellation of the ARC tunnel as a risk to our region’s future.”

Read the complete article here: Hudson

Controlling Risk Without Gimmicks: New York’s Infrastructure Crisis and Public-Private Partnerships

OFFICE OF THE STATE COMPTROLLER
Thomas P. DiNapoli, State Comptroller

New York has a growing backlog of unmet public infrastructure needs, with limited
public funds to pay for them. The replacement of the Tappan Zee Bridge, for example,
seems to be held up due to an estimated $16 billion price tag. A 2009 report by the
Office of the State Comptroller estimated investment needs of $250 billion to maintain
transportation ($175 billion), municipal wastewater ($36 billion) and clean water ($39
billion) infrastructure across the State over the next 20 years.

Executive Summary

New York has a growing backlog of unmet public infrastructure needs, with limited
public funds to pay for them. The replacement of the Tappan Zee Bridge, for example,
seems to be held up due to an estimated $16 billion price tag. A 2009 report by the
Office of the State Comptroller estimated investment needs of $250 billion to maintain
transportation ($175 billion), municipal wastewater ($36 billion) and clean water ($39
billion) infrastructure across the State over the next 20 years.1
In response to these challenges, there has been much discussion of a construction
and financing technique known as the public-private partnership (P3) as a means of
filling the gap. At a time when the State already bears a high tax and debt load, P3
arrangements can provide alternative ways to finance needed improvements. As
State policy makers consider undertaking these partnerships, however, they must be
aware of the four primary financial risks associated with the public-private partnership
model:

* Failure to Identify the Full Value of Public Property. P3 agreements may
underestimate the value of public assets, and so short-change the public.

* Unfavorable Pricing Mechanisms. P3 agreements may include pricing
mechanisms or financial contingencies that burden the public with unwarranted
expenses, including excessive fee and toll increases.

* Unrealistic Expectations and Poorly Drafted Agreements. P3 agreements may
create expectations that go unmet, either when a private entity promises more than
it can deliver or when the contracts fail to lay out the private partner¡¦s obligations
adequately. The result may be that the public fails to receive the anticipated
benefit.

Read the entire article: Comptroller

Obama Pushes Transportation Spending

by Jackie Calmes

WASHINGTON — The Obama administration said Monday that it would ask the lame-duck Congress next month to approve a $50 billion down payment on his long-range initiative to improve the nation’s roads, railways and air systems and to find savings to offset that cost, suggesting a new urgency to create jobs after last week’s disappointing unemployment report.

President Obama met at the White House with mayors, governors and current and former transportation secretaries of both parties to promote the infrastructure initiative, which he first proposed in September. Afterward, Ray LaHood, his transportation secretary and a former Republican congressman, told reporters that the lame-duck session would present an “upfront opportunity” to pass the $50 billion measure.

Before then, however, the midterm elections on Nov. 2 are all but certain to expand the size of Mr. Obama’s Republican opposition for the new Congress that convenes in January. So Republicans returning later in November for unfinished business are likely to be in no mood to compromise with the White House when they will have the strength of greater numbers in the new year.

Approving $50 billion more for construction projects would be difficult enough, given that many Democrats have shied away from supporting more economic stimulus spending and that Republicans have convinced many voters that Mr. Obama’s initial two-year stimulus program, which included roughly $40 billion for transportation projects, failed to create jobs. But trying to agree on offsetting savings also would be contentious.

“This plan will be fully paid for,” Mr. Obama told reporters in the Rose Garden. “It will not add to our deficit over time.”

In September, Mr. Obama proposed allocating $50 billion as a short-term step before creating a national infrastructure bank, which would seek public-private partnerships to invest in projects selected on merit and take some decision-making out of the hands of Congress. To raise the $50 billion, he called for ending some tax breaks for the oil industry. White House officials said he would press for action in Congress next year.

Republicans, many of whom are from energy-producing states, oppose such measures, and higher gasoline taxes too.

Mick Cornett, a Republican who is the mayor of Oklahoma City, said after the White House meeting that an administration official indicated that “they’re going to bargain it with the tax cuts in the lame-duck” session — suggesting that Mr. Obama might agree to extend the Bush tax cuts temporarily for wealthy taxpayers to get Republicans’ support for transportation money.

But administration officials and others at the bipartisan meeting said no one suggested a possible trade-off. The Bush tax rates expire Dec. 31, and Mr. Obama supports extending them for incomes below $250,000 a year, while Republicans want an extension of top rates as well.

“There was never a hint of bargaining off the administration’s position on tax cuts for infrastructure,” said Gov. Edward G. Rendell of Pennsylvania, a Democrat.

Said Norman Y. Mineta, a Democrat who served in Congress and more recently was transportation secretary in the Bush administration, “The whole issue of financing has not really been thought out.”

In any case, Congress is unlikely to take up new issues after the election.

“We will look for ways to promote jobs, and infrastructure certainly could be one of those ideas,” said a Democratic leadership aide, speaking on the condition of anonymity. “But I doubt it will be in the lame duck, and we can’t commit to a specific number or plan yet.”

The lame-duck Congress will consider reauthorizing existing transportation programs for a short time because those otherwise expire after Dec. 31. But a six-year reauthorization has been stalled because supporters on the Congressional transportation committees — including a few Republicans — say a higher gas tax is needed to maintain America’s roads, bridges, transit systems and ports. But most colleagues oppose raising the tax.

“The infrastructure needs are real,” Mr. Cornett said. “We can argue about how to pay for it. We spend $50 billion to rebuild Afghanistan. We’re reconstructing Kabul and not Philadelphia.”

The administration’s decision to seek $50 billion soon instead of waiting until early next year came as a surprise to some at the meeting. But Democrats said it reflected both concern for the economy’s weakness and the fact that the lame-duck Congress will probably have more Democratic votes than the new Congress in January.

Last Friday’s monthly jobs report confirmed a slowdown in already anemic private-sector hiring, and stoked calls from cities, states, business groups, unions and many economists for more federal help.

Mr. Obama, appearing in the Rose Garden with the other officials after their meeting, brandished a new report from his economic advisers concluding that this is the “optimal time” to invest in public works because of high unemployment and lower prices in the construction industry, which has been hit harder than any other by the punctured bubble in housing and commercial real estate.

The report said that 61 percent of new jobs would be in the construction sector, which has an unemployment rate nearly twice the overall national average of 9.6 percent.

One Bridge Fixed…But our infrastructure needs new funding sources

By DENISE RICHARDSON
Managing Director of the General Contractors of New York

Whaddya know? You can get there from here.

Today, the new Willis Avenue Bridge is due to be eased into place, completing its carefully planned journey by barge to its permanent home. It will replace a structure built in 1901 and now one of the lowest-rated bridges in New York City.

The replacement arrived literally in the nick of time. More than 70,000 vehicles a day use the bridge, which has been past the point of no return for years.

Yet this is just one success story among a limitless need to replace and upgrade our transportation network. These days, it’s all too common for infrastructure projects to be put on hold, delayed or cancelled.

We’re going from bad to worse — and fast. Earlier this year, the transportation think-tank TRIP released a report highlighting the crisis state of New York’s infrastructure. Some 82 percent of major roads in the city are in poor condition, and 35 percent of bridges are structurally deficient. Traffic congestion costs the average driver 44 hours a year.

A lack of funding is delaying such critical projects as the renovation of Kosciuszko Bridge and the expansion of the Major Deegan Expressway, while officials are reducing the scope of other projects so that they only meet immediate needs and provide no room for growth. The state Department of Transportation and MTA five-year capital programs face a $20 billion funding gap over the next five years.

Too many elected leaders opt to postpone the decisions to launch genuine infrastructure improvements because they don’t want any vote in favor of a tax hike coming anywhere near their names — and are also unwilling to fully disclose to their constituents how the “dedicated” taxes they already pay are diverted to other uses

Our dedicated highway and bridge trust fund is broke – with 37.7 percent of its revenues over the last 16 years having gone to cover state operating expenses rather than to pay for the repairs and other basic work it was set up to fund.

On top of that, the state collects $1.15 billion a year in gasoline-sales taxes, supposedly to fund transportation needs — yet the money instead goes to the general fund, never to be seen when it comes time to fund a road, bridge or transit project.

The problem is not exclusive to New York. Federal transportation policy is stuck in its own holding pattern because no politician wants to venture near the hot-button issue of raising the gasoline tax, the proven generator of user fees that have paid for our transportation infrastructure since 1956.

The continued deterioration of our ability to move people and goods has chilling implications for America’s economy.

A partial solution is found at the pump. Without question, taxes have become the bane of our society — yet few can offer an alternative to gasoline taxes as a funding source to repair the roads that move our economy.

Yes, the public has every right to be cynical that gas taxes will yield a smoother, safer ride — since officials already siphon off dedicated highway-trust money for other government spending.

To win public acceptance of these taxes, infrastructure advocates need to do far better at proving the direct connection between the taxes charged at the pump and the condition of our roads and bridges. And the revenue must go to irrevocable trusts that will reliably direct the taxes to the specific purpose they were raised for.

Organizations like the US Chamber of Commerce, the American Trucking Association and AAA are now united in support of a gas-tax increase to fund transportation improvements – because they all recognize that safe roads and bridges keep the economy and the drivers moving.

Overall, Americans are paying the lowest gasoline taxes since the early days of the automobile. Federal fuel taxes have lost 33 percent of their purchasing power since the last increase in 1993 — yet there’s plainly no support for a new hike. Meanwhile, states continue to pilfer from gas-tax trust funds and underfund capital programs.

Elected officials face a simple choice: Either preside over a crumbling and often dangerous transportation infrastructure — or build political support for a funding structure that can do the job, and so strengthen our city, our economy and our future.

The arrival of the new Willis Avenue Bridge is a dramatic demonstration of a success that’s been years in the making. We can get there from here. But we need to be willing to pay for it.

Denise Richardson is the man aging director of the General Contractors Association of NY.

DiNapoli: New York’s Local Infrastructure Needs Projected To Be $80 Billion Under Funded Over Next 20 Years

Multi-Year Capital Planning and Increased Federal Funding Needed
Driscoll Joins DiNapoli at News Conference in Syracuse

At the current rate of spending, New York will have $80 billion in unmet infrastructure needs over the next 20 years unless state, federal and local governments work together to improve multi-year capital planning and better fund infrastructure projects, cautioned State Comptroller Thomas P. DiNapoli in a report he released today in Syracuse. DiNapoli’s report estimates the state’s capital needs for repairing roads, bridges, and water and sewer lines will swell to a quarter trillion dollars over the next 20 years.

“New York’s deteriorating infrastructure is a serious problem, an $80 billion problem,” DiNapoli said. “Governments at every level – federal, state and local – must face the state’s aging infrastructure head on. This won’t be easy but if we don’t invest, our infrastructure will fall apart. Now more than ever, localities have to work together and work smarter to improve capital planning regionally. Government can accomplish so much more when – on a regional basis – we prioritize our mutual needs, pool our resources and get the job done.

“My office is tracking and auditing how New York spends federal stimulus dollars. But even with the stimulus funding, there are billions of dollars in urgent infrastructure improvements that are languishing.”

New York’s local infrastructure needs have been under funded for years, in part due to a significant slowdown in federal and state investments, according to DiNapoli’s report, “Cracks in the Foundation: Local Government Infrastructure and Capital Planning Needs.”

The American Recovery and Reinvestment Act (ARRA) provides New York with funding for immediate capital improvements, including about $500 million for water and sewer systems and $1.8 billion for roads and highways. While ARRA represents increased federal commitment to infrastructure investment, it only scratches the surface of New York’s looming infrastructure deficiencies, according to DiNapoli.

DiNapoli’s report advocates for improving capital planning at the local government level by conducting an affordability analysis to identify funding gaps; seeking a sustained commitment by federal and state policymakers to increase investment for infrastructure; and developing a regional approach to prioritizing projects.

“Comptroller DiNapoli puts the state’s infrastructure woes into perspective and the level of funding needed is staggering,” said Syracuse Mayor Matthew J. Driscoll. “The City of Syracuse has several infrastructure projects that need to be addressed in a comprehensive manner. The water main break three months ago is an example of the need to address this very old infrastructure in our City. Like many older cities, Syracuse needs to find a long-term funding solution for these types of projects. However, in the short term, we have to take a piecemeal approach to replacing and maintaining our water system. The estimated cost to completely replace our existing water system is in excess of $2 billion. Clearly our city’s tax base cannot support this amount of investment.”

The report is part of DiNapoli’s on-going oversight of federal stimulus spending. DiNapoli’s office is tracking every stimulus contract on the Open Book New York website (www.openbooknewyork.com). DiNapoli is also auditing local governments’ capital planning processes; conducting a series of audits on stimulus spending; and preparing a management training guide and online tutorial on effective multi-year capital planning for local government officials. In addition, DiNapoli created the Local Government Leadership Institute to offer local governments a forum to discuss regional issues and explore collaboration opportunities.

According to DiNapoli’s report, New York will need to invest $250.1 billion in its water, sewer and highway systems over the next 20 years. This includes $175.2 billion for transportation needs, $36.2 billion for municipal wastewater improvements and $38.7 billion for clean water investments. Assuming current funding levels can be maintained, roughly $80 billion of these projects will remain unfunded.

DiNapoli’s report recommends that state and local officials:

* Strengthen municipal capital planning by requiring local governments to have a long-term capital plan in place in order to receive any additional aid and asking state agencies to provide guidance on best practices for construction and capital financial management.
* Urge better intergovernmental coordination among the state and local governments to maximize resources and economic benefits.
* Establish regional capital planning vehicles, modeled after the metropolitan planning organizations used by the U.S. Department of Transportation to prioritize highway projects.
* Advocate for increased funding from the federal government after ARRA funds are exhausted.
* Consider other pooled-financing vehicles similar to the revolving loan fund operated by the state’s Environmental Facilities Corporation.

DiNapoli was joined at the news conference by Jerry Comer, International Vice President of IBEW, and Ron Haney, Secretary/Treasurer of the Syracuse Building and Construction Trades.

The following is a list of aging infrastructure systems across New York.

Regional Examples of New York’s Aging Infrastructure

Statewide

* About 37 percent of highway bridges in New York state are either structurally deficient or functionally obsolete (Source: New York State Department of Transportation, Highway Bridge Data https://www.nysdot.gov/main/bridgedata)

Western NY

* City of Buffalo water system
* Village of Springville sinkhole repairs on South Buffalo Street

Central NY

* Oneida County Sewer District
* City of Syracuse water system

Capital District

* Town of East Greenbush water system
* City of Troy water system

Southern Tier

* Broome County bridges rated structurally deficient
* Town of Vestal water system

Hudson Valley

* Westchester County sewage treatment plants
* Town of Middletown sewer/stormwater infrastructure

Northern NY

* Village of Saranac Lake water system
* Town of Elizabethtown sewage and wastewater treatment

Long Island

* Village of Patchogue sewage and wastewater treatment

Report, “Cracks in the Foundation: Local Government Infrastructure and Capital Planning Needs.”

NEW YORK STATE COMMISSION ON ASSET MAXIMIZATION DELIVERS FINAL REPORT TO GOVERNOR PATERSON

Report Contains 27 Major Recommendations to Help Create Jobs, Generate Economic Activity, Benefit Colleges and Universities across New York State

Governor Calls for Creation of State Asset Maximization Board to Provide Oversight Process for Potential Public-Private Partnerships

Governor David A. Paterson today accepted the final report from the New York State Commission on Asset Maximization. The Commission was charged with broadly examining whether asset maximization can benefit the State, as well as whether any specific New York assets are suitable candidates for Public-Private Partnerships (PPPs). The final report contains 27 major recommendations to help create jobs, generate economic activity and benefit colleges and universities across New York State. Some of the key recommendations include: school construction and renovation in Syracuse and Yonkers; 300 bridge renovations in all corners of the State; wind power on the Great Lakes; and high speed rail.

In addition to outlining specific project ideas that could be effective long-term projects, the report also recommends the creation of a State Asset Maximization Board to screen, oversee and implement PPPs. The State Asset Maximization Board will serve as an entry point for new ideas, provide continuous oversight and transparency, and enable New York State to tap into New York’s best and brightest minds – across the public and private sectors. The Board would be unsalaried.

Read the entire press release: June 1, 2009 Press Release

Read the full report from the State Asset Maximization Board: SAM