The waiting went on and on as anxious construction industry and state officials watched for months for glimmers of progress in Washington on a bill that they hoped would ease the recession’s tightening grip. On Feb. 17, the long wait ended as President Obama traveled to Denver and signed what he called "the most sweeping economic recovery package in our history," the $787.2-billion American Recovery and Reinvestment
Act of 2009. It was good news for construction, because the measure contains about $130 billion for highways, buildings and other public works. "How can you not be happy?" asks Stephen E. Sandherr, the Associated General Contractors’ CEO. "This is the most significant investment in infrastructure in my lifetime."
As industry officials scrutinize the voluminous bill, they are looking for how much money it allocates for key programs and for details on how and when the funds will be disbursed.
"It’s not a perfect package by any means," says Steve Hall, American Council of Engineering Companies’ vice president for government affairs. "But it’s hard to deny that this doesn’t represent a major, major expansion of federal investment in infrastructure across the board."
The Congressional Budget Office, Capitol Hill’s official scorekeeper, estimates the measure’s price tag at $787.2 billion. Of that, $575.3 billion is appropriations and direct federal spending. Tax cuts account for the remaining $211.8 billion. Pennsylvania Gov. Edward Rendell (D), a public-works advocate, gives the package "a pretty strong B-plus." He says, "It’s a good bill under the circumstances...given the partisanship down in D.C." He adds, "To make it a great bill, I would have significantly increased the infrastructure spending [and] decreased the tax cuts."
For construction, the package has some pleasant surprises, particularly high-speed rail, which emerged with $8 billion for a new corridor program. An earlier Senate version had $2 billion, and a version the House passed in January had zero.
But construction did not get all it wanted. Probably the biggest disappointment was that the final package has no specified funding for school construction. As the bills moved out of committee, the House- version bill had recommended $20 billion for K-12 and college facilities while the Senate’s called for $19.5 billion.
But Sen. Susan Collins (R-Maine), a pivotal player in shaping the final package, was opposed to a new federal school-construction program. To help win her vote, lawmakers stripped out the school-construction line-item funding.
House and Senate negotiators did permit school modernization projects to be eligible for some of the $39 billion in "state fiscal-stabilization" funds set aside for a broad range of educational purposes. It would be up to local school-district officials to determine how much of their shares of that $39.5 billion would go for such uses as hiring or retaining teachers or upgrading buildings. New construction would not be eligible.
The bill moved swiftly, by Capitol Hill standards. The first detailed proposal, in the House, was unveiled on Jan. 15. Final congressional action came on Feb. 13, when the House passed the measure, 246-183, and the Senate cleared it that night 60-38, the bare minimum needed for passage. Republicans lined up almost solidly against the stimulus. It got no GOP votes in the House and just three in the Senate: Collins, Olympia Snowe of Maine and Arlen Specter of Pennsylvania.
Even though much of the stimulus talk was on having the bill fund "shovel-ready" projects, only $34.8 billion, or 11% of the bill’s $308.3 billion in actual appropriations outlays, will occur by Sept. 30, the end of fiscal 2009, CBO says. After that, the pace will pick up. CBO estimates that 2010 will be a much bigger year, with $110.7 billion in appropriations-related outlays.
Some federal agencies have laid the groundwork to move the money out. At the Dept. of Transportation, Secretary Ray LaHood announced he had set up an internal Transportation Investment Generating Economic Recovery (TIGER) team. The aim, he said, is "to make sure that DOT’s portion of recovery funding goes out to states and localities as quickly as possible in order to immediately create jobs and strengthen our economy and transportation systems."
The stimulus gives DOT only 21 days to formally apportion highway-stimulus funds to the states, but LaHood may move even faster. "We’re hearing from the DOT that within seven days the money can clear Washington to the states," says Nick Yaksich, Association of Equipment Manufacturers’ vice president for global public policy. States then would put projects out for bids.
For the infrastructure stimulus money, the bill sets a goal of using at least 50% of those funds on work that can be started within 120 days of the bill’s signing. But the rules are tougher for highway and transit funds. States or localities that get the money face use-it-or-lose-it mandates. If they don’t obligate at least 50% of their allotments within 120 days after DOT apportions the money, the bill directs DOT to take away the unused money and redistribute it to other states.
The Defense and Veterans Affairs departments must report to Congress within 30 days on how they plan to spend their stimulus construction allocations. The General Services Administration has 45 days to produce its spending report but must include a list of projects it plans to fund. The bill does not penalize DOD, VA or GSA if they do not obligate money in 120 days.
TRANSPORTATION [$49.3 billion]
DEFENSE/VETERANS [$7.8 billion]
HOUSING/HUD [$9.6 billion]
ENERGY [$30.6 billion]
BUILDINGS [$13.4 billion]
WATER AND ENVIRONMENT [$20.1 billion]
No specific line item, but $39.5 billion of the bill’s $53.6-billion State Fiscal Stabilization Fund will go to local school districts, and school modernization is one of several eligible uses for that $39.5 billion. Local school officials will decide how to use the funds.
|SOURCES: HOUSE, SENATE APPROPRIATIONS COMMITTEES, OFFICE OF SEN. BEN NELSON, AGC, ENR|
Stimulus funds will be distributed in a variety of ways. DOT highway and transit funds and Environmental Protection Agency water infrastructure aid will be parceled out via established formulas to state or local agencies, which in turn will issue construction contracts. Other federal agencies, such as GSA, VA and DOD, including the Army Corps of Engineers’ civil-works program, will manage their stimulus-funded contracts directly.
Besides the spending, the stimulus contains tax incentives that may help construction, including one that allows states or localities to issue new "Build America" tax-credit bonds for 2009 and 2010.
Other breaks are aimed at boosting sales of equipment and other capital goods. Among them is a one-year extension through 2009 of the Section 179 incentive, which lets small businesses deduct from income up to $250,000 of capital expenditures in the year the items are purchased. Also extended for one year, through 2009, is a bonus depreciation break that lets companies immediately deduct 50% of the costs of depreciable goods, such as construction equipment.
John McClelland, American Rental Association vice president for government affairs, says the extensions of Section 179 and bonus depreciation "are important for our members." He notes that some firms will be able to use both incentives, but adds that Section 179 is limited to companies with $800,000 in annual capital spending.
Tax breaks can go only so far, however. McClelland says large and small members of his association tell him, "Help on our taxes is great, but what we really need is customers. Right now what we really need is business coming through the door."
Another focus of the package is helping renewable energy expand. Obama underscored that point by signing the bill at the Denver Museum of Nature & Science, which has solar panels on its roof. The stimulus’ tax title has $19.6 billion in energy tax incentives, many of them for renewables and conservation. By far the largest is a three-year extension of the production tax credit for new renewable-energy projects. Breaks for residential energy-efficiency work also are expanded or extended. In addition, the bill creates a 30% investment tax credit for companies that manufacture products used in conservation, producing renewable energy, electricity transmission and distribution, carbon capture and sequestration.
Construction officials were disappointed that the final tax title scaled back a provision dealing with companies’ ability to "carry back" 2008 operating losses to offset profits recorded in earlier years. House and Senate negotiators agreed to allow losses to be carried back five years, but only companies with annual gross receipts of $15 million or less can qualify. Setting a $15-million threshold means that only about 5% of AGC’s member companies will be able to use the provision, Sandherr says.
Construction also hoped that the final bill would include House language to abolish a mandate that public agencies withhold 3% of the value of their contracts, effective in 2011. Negotiators instead adopted a Senate provision that delays the 3% withholding for a year.