Report Says California Needs a New Public Works Finance Structure

In the short term the stimulus package may bring economic relief, but in the long term California needs to figure out how it is going to fund the hundreds of billions of dollars of work that are needed to move the state forward.

I found this one on a Capitol Alert from the SacBee. The Public Policy Institute of California published a report that looks at what we are doing now and believes that we will not be able to pay for our what our needs if we do not change course.

California may need a half-trillion dollars to expand and upgrade transportation systems, schools, water delivery and other infrastructure during the next 20 years but the state's system for financing public works is "seriously flawed," the Public Policy Institute of California says in a new report.

With constraints on taxes, including super-majority votes in the Legislature and among local voters, state and local governments rely on general obligation bonds whose repayment must compete with other claims on public treasuries. But, PPIC's report says, GO bonds are a "mixed blessing" and repaying the large amounts of money needed for infrastructure are beyond the capacity of state and local budgets without alternative financing.

"The Obama administration may include funding for state infrastructure projects in an economic stimulus package," Ellen Hanak, PPIC research director and author of the report, said in a statement accompanying its release. "But California needs a long-term solution. There's an opportunity here for the state to rise to the challenge and improve the way we finance the investments in our future."

The full report can be found here.

I think the check is coming for the "free lunch".

Off Road Air Quality, Part 2: The Construction Industry Side

So I had a little conversation with some of my friends yesterday and today about the Air Quality Rule. It seems as though I had taken some of the environmentalist positions without describing the how this issue has a real impact on the construction community.

One of the key aspects is the requirement that Off-Road Diesel construction equipment regulation meet stringent Tier 4 requirements for air quality. The manufacturer Caterpillar has a white paper about the subject here. It appears the rule could negatively impact the industry at a time when it is already down.

So as the Washington Post reported, maybe this could bottleneck the stimulus. How would the work get done if the vehicles and equipment were not available?

I spoke with Mike Caples who publishes the Contractor News and Views and he shed some light on the issue.

The industry groups have found numerous issues with the rules.

Cost: It will cost engineering contractors a great deal of money to comply with the rule. Specifically the retrofitting and purchasing of the new engines could cost as much as $250,000. Additionally the since the engines are going to become obsolete before their normal life span the life cycle costing has been thrown out of whack. Instead of having 20 years for a off-highway vehicle to pay itself off, it now has a handful depending on the engine.

Technology: The technology is under development but it is not widely available. And more than likely will not be by 2011.

Safety: Some of the filters may obstruct the operators view. This could be a real safety hazard on sites.

According to the Construction Industry Air Quality Coalition (CIAQC):

The coalition members warned that admirable as the regulations may be, as they are currently written, the goals are simply unachievable and will only result in 10,000 to 30,000 lost jobs, delayed infrastructure improvement projects and unmet clean air goals.

Ill keep drilling down on this one.

Thanks for the quick response and input.

AGC Fighting Clean Air Rules

The AGC is starting to put pressure on the incoming administration to roll back clean air regulations here in California. They are saying that they will not be able to do the work if the regulations are put in place.

As stated in yesterday's Washington Post:

About $30 billion of Obama's $825 billion economic stimulus plan is being set aside for highways and bridges. Some of that money would be squandered unless the new president blocks a rule that might keep some earthmovers from doing their economy-lifting work, a group of contractors says.

The Associated General Contractors of America wants Obama to put up a federal barrier to a California clean-air rule that regulates off-road diesel engines already in use. It will require the replacement or retrofitting of the engines of earthmoving equipment. The state has an estimated 180,000 loaders, graders, excavators and other heavy equipment.

"What is the point of stimulus money if it's used to replace equipment instead of building?" asked Mike Kennedy, general counsel of the Arlington-based group. The regulators "assumed costs could be passed along, but economic circumstances have changed so dramatically that the rule has to be reopened."