Wednesday, March 28, 2012

U.S. Senator Mark Warner frustrated with House stalling the “must do” federal transportation bill

U.S. Senator Mark Warner

UPDATED 3/29: Today congress passed a stopgap 90-day measure that avoids a shutdown of federal highway programs that would have occurred Sunday, April 1.

State transportation departments are still left with no visibility or ability to write contracts for road maintenance or new construction. (See Sen. Warner and VDOT views from yesterday’s conference call following this update.)

 March 28, 2012: The already strained transportation funding in Virginia is “going to be exacerbated by the federal government,” said Virginia’s U.S. Senator Mark Warner. He was frustrated as he and former VDOT commissioner and former CEO of Hampton Road Transit and now President and CEO of The Philip A. Shucet Company laid out the consequences in a conference call this morning. “People will lose their jobs at the end of the week as the current funding expires,” Warner said.

Taxes will stop being collected at the gas pump. Whether customers will see a decrease at the pump or whether it will be collected with anticipation of sending it to the government later is not clear said Warner. There would be no obligation for the company to turn over that money.

“It is just one more example of the dysfunction in Washington.”

He knows firsthand as a former governor how Virginia has struggled with transportation through many administrations. No long term funding is in sight.

Senate passed a two-year extension of the $109 billion highway transportation bill two billion dollars will going to Virginia. There was broad bipartisan support in the Senate with 74-22 margin. It addresses safety concerns for metro projects and extends public-private partnerships.

“It wasn’t a perfect bill but it would provide predictability for Virginia and for 90,000 jobs – with three million jobs nationwide that are now going to be put in jeopardy,” he said.

The house refuses to act on the Senate’s bill or even one of their own so that it could than at least be taken up in conference. A 60-day extension leaves all state departments of transportation in limbo.

“You can’t write contracts with 60-days,” said Warner.

Funding of the nation’s infrastructure has always had broad bipartisan support in the past. “If we can’t get this done where are we headed?” asked Warner. The Senate had to settle for two-year funding when five years had been the traditional for transportation bills in the past explained Warner.

He wished the House would have at least amended it and passed it so it could have gone to conference. “This is no way to run an enterprise as large as the federal government with these short term extensions,” he said. “We saw the damage that was inflicted when we went through a similar battle with the airport systems because the FAA bill expired.” Taxes couldn’t be collected and revenue was lost or delayed.

He said that with Virginia already suffering at the state level this would only make things worse. Partners are left waiting and wondering about putting up their share of construction.

Mr. Shucet said, “The only way this program with partners works for the taxpayers – there must be certainty in the construction program.” The state and the government should be working together as true partners. “These [short] extensions just wreak havoc,” said Shucet.

“This is no way to do business,” said Warner. “You prepare bids and than they cost money at the private sector level.” It could result in increased costs for contracts explained Shucet. “Nobody buys a house on the hope that they will be able to pay for it in 60 days.”

Warner asked Virginia’s to contact their Representative and urge them to pass the Senate bill or a House bill for conference. It can be resolved in 2-3 weeks. With only a 60-day extension they will be right back in the same spot said Warner.

The House has been flipping around from doing a one-year bill; a five-year bill and now a 60-day bill said Warner. The House Republicans on March 18 defeated an attempt to force a vote on the $109 billion bipartisan transportation bill that was approved by the Senate. There are only a few days left until the House goes on recess at the end of this week or the bill expires.

That would indirectly have an affect on GARVEE bonds said Warner. Governor Bob McDonnell has made use of borrowing against future federal entitlements through bond issues to speed up work on Virginia Highways.

“If there are no future proceeds it would have an affect … it doesn’t give the certainty bond holders would expect when we’re limping along on 60-day extensions,” said Warner.

“The reason that GARVEE bonds sell at such a high coupon rate because the expectation is very high that the federal government will pay its share of the transportation funding. If that’s put in jeopardy that gets factored into the coupon rate in the bond pricing,” said Warner. He emphasized that one 60-day extension may not affect the coupon rate but with “further uncertainties that’s not good,” he said. That is especially true when the Senate bill contains TIFIA funding that leverages other financing.

GARVEE bonds are a gamble against federal highway dollars that are not guaranteed to exist in the future, this plan would essentially leads to public IOU’s.

Jeff Southard, a former VDOT commissioner and now executive vice president with the Virginia Transportation Construction Alliance, a trade association that represents the road building industry was on the call. “I can tell you the failure of the House to act has had a very chilling affect on the industry.” It could have a serious impact on employment, purchases and tax revenue. “If they don’t believe contracts are going to be let … they may look at temporarily shutting down,” said Southard.

Jason Bond a spokesman for Salem VDOT said it would be just as disruptive locally. Before they move forward with any contract they check to see if the federal and state funds are there. If the funds are not there “they delay it.” Bond said VDOT does the same thing before they actually execute the contract.

“If the federal [transportation] bill is not signed we would start looking at delaying our advertising and execution of contracts that have federal funds on them.” They would probably do that with their state contracts too because we’d be shifting state dollars around trying to cover some of our contracts that were short with federal funds.

“It would be a huge impact on our ability to outsource our construction and maintenance work,” said Bond. It would even impact current construction depending on the contract. It would come to a halt. So far when there have been delays of federal funds VDOT has been able to keep projects moving until the funds became available.

In addition it effects millions of dollars in spring maintenance paving contracts that start in the summer and those are federally funded said Bond. Most of the contracts have been awarded but the lack of funds at this point would delay execution. All these scenarios would result in lost jobs for those contractors preparing to bid and be awarded state contracts for new projects as well as maintenance. There is no work for road crews or even engineers

“We’re counting on those federal dollars to be there in putting together our schedules of developing projects and developing our maintenance schedules and road work,” said Bond. “If we can’t count on those funds being there it really does halt and delay what we had planned to do. It all has to come together.”

Posted By Valerie Garner

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