Wednesday, February 6, 2013

Raising Taxes and Traditional Project Delivery

In 1979 California ushered in the anti-tax era in politics with passage of Proposition 13.  The nationwide anti-tax movement has stressed governments everywhere, and one consequence has been deferred maintenance and underinvestment in our infrastructure at the local, state, and national levels.  This is one of the reasons behind the growth of public private partnerships.  Governments have been looking for ways to have private investors fund infrastructure because they haven't had the money. 

PPP has been sold as a preferrable way to deliver infrastructure "because private development is more efficient and innovative."   But as demonstrated by the AOC's study for the Long Beach Courthouse, the metrics to prove this proposition are not very solid.  At the present time, hype, fashion, and lack of funds, more than hard metrics, is what dictates which project delivery system is selected.

Today, federal taxes are lower as a percent of GDP than at anytime since 1950 .  States, have similarly depressed tax revenues relative to their needs.  There is evidence, however, that additional revenues may be coming.  At the beginning of this year, the House of Representatives signed off on a tax rate increase for the wealthiest Americans.  And here is an article in the Wall Street Journal how state governors are starting to warm up to tax talk to fund infrastructure construction (quotation slightly condensed):
Republican governor Tom Corbett of Pennsylvania unveiled a plan Tuesday to generate nearly $5.4 billion in new revenue over five years by lifting a cap on gas taxes paid by wholesale gasoline dealers.
 Michigan's Republican Gov. Rick Snyder, who said infrastructure spending is a legislative priority for 2013, last month proposed raising both the gas tax and registration fees.

Democratic Gov. Deval Patrick of Massachussets wants to add $1.02 billion a year for transportation funding over the next decade. Last month, he proposed: raising gas tax, tolls and fees for vehicles that pollute more.

Virginia's Republican Gov. Bob McDonnell proposed scrapping the gas tax and increasing the sales tax to fund infrastructure needs

Two weeks ago, Wisconsin Republican Gov. Scott Walker's transportation-funding commission recommended raising the state's gas tax by five cents and creating a mileage-based registration fee for drivers. 
Remember that in 2003 the California electorate recalled Governor Gray Davis, in part because he had raised taxes on vehicle license fees.  Times they are a changing. 

As tax revenues increase with the improving economy and increased rates, states may have more flexibility in selecting which project delivery method they should adopt.  They will still be looking for solid metrics to decide which delivery method is best. 

Monday, February 4, 2013

Our Next Chair of Division 4

So this is not official until the annual meeting, and it won't take effect until September 1, 2013, but the governing committee has selected Arlan Lewis to be our next chair for Division 4.  As you can see, the women are swooning already ... This grainy photo was taken at the end of our Divison 4 dinner in Naples. 

Arlan will do a great job.  The dress standards will go up.  But the Division will be in good hands. 

Congratulations, Arlan ....



Sunday, February 3, 2013

Ephemeral Naples

For its mid-winter meeting the Forum met at the Waldorf-Astoria, five miles up the beach from Naples.   Below and east of there is no-mans land: the Everglades, Ten Thousand Islands National Wildlife Refuge, Big Cypress National Park, and Florida Panther Wildlife Refuge.  Alligators prowl the highway known as Alligator Alley leading across to Miami.   They share apex predator status with Burmese pythons.  The snakes unlock their jaws and swallow baby alligators whole; the alligators snatch the snakes and devour them under water.

The Darwinian spirit infects local litigators too.  Arriving in Naples there was buzz at the Forum about the ongoing Tampa defamation trial against a local shock jock, Bubba the Love Sponge Clem.  The Plaintiff’s attorney visited a local steak house after court last week for dinner.   There, he was bemused by an attractive young woman.  Much drinking and flirting ensued.  At the end of the evening the woman asked if the attorney would please drive her car to her apartment, a short distance away, because she had consumed too much alcohol.  The gentleman obliged and was promptly arrested by the local police for drunk driving and was made to spend the night in jail.  The story is that the police had been alerted by the vixen and had been lying in wait for some time at her request.  Oh, and she was a paralegal for the defense firm.  This was all over the news with a non-sequestered jury.   At the trial court’s hearing on motion for mistrial—on the grounds that the publicity of the arrest must surely have contaminated the jury—it was confirmed that the woman had lied about the identity of her employer.  The paralegal and defense attorneys refused to answer questions, asserting their right against self-incrimination.  The judge refused to grant a mistrial.  As Kerry Kester might say, we are not in Nebraska anymore, folks.  And mind those snakes. 

A band of mangroves and a lagoon separate the hotel from the beach.  My room
afforded an expansive view across a long row of  condominium and hotel towers that line the Gulf of Mexico up and down the beach in this area.  One can imagine them watching out across the gulf, moment frame steel relics abandoned to hurricanes and a rising sea in the not too distant future.   Florida is flat.  The average elevation of Naples is less than 10 feet above sea level.  This week the waves lapped peacefully on a sliver of beach.  But far inland, on the way to the airport, I noted that construction excavations also exposed sand.  The landscape is covered with lakes and ponds.  Surface water is said to be just below the surface everywhere, and it won’t take much for this to be just above the surface.  So the state worries about global warming.  Predictions for sea level rise over the balance of this century vary from .5 feet to more than six feet.  Anyway it plays out, Florida will be affected more than most. 

Most of the construction in and around Naples took place after hurricane Donna made a direct hit on Naples and devastated the area in 1960.  My taxi driver on the way back to the airport says he arrived from Haiti fifteen years ago.  In 2002 to 2006 he drove cement trucks for Cemex.  “They paid me $1,050 per week,” he said.  “Things were really good.”  He speculated with the purchase of a plot of land for $12,000, but he couldn’t really afford it.  “Just pay me $2,000 and $100/month,” said the seller.  That worked out well.  In 2006 he sold the land for $60,000.  He promptly turned around and invested in two other lots for $25,000 each.  When the crash came, he was laid off by the cement company along with most other drivers, he lost one of his lots in foreclosure, and the other one is now worth $5,000.  “It’s not coming back the same,” he says. 

In the meantime, at the upscale Gulf Coast InternationalProperties website they are bullish: 

“It appears that the worst is behind us and the future is paved in (developing) dirt.  All across Southwest Florida the business of building is once again booming.  It’s not just a single-family home here and there in The Moorings or small multi family developments in Old Naples but the larger developers like D.R. Horton and GL Homes are making land purchases on a large scale.  In Lee and Collier county 2700 single and multi-family permits have been pulled.  In the City of Naples single-family permits are up more than 50% over last year according to the Naples Daily News.  If you drive through the streets of the downtown neighborhoods whether it be Port Royal, Aqualane Shores, or The Moorings, there is new construction everywhere you look.” 

There will be construction.  There will be actions for damages.  The humidity was low this week.  I saw no alligators, but I’m sure they were there just out of sight.   



Tuesday, January 29, 2013

Join Us for the Division 4 Dinner in Naples

Our Division 4 Dinner in Naples will take place at 8:00 P.M. on Thursday, January 31, 2013.

We'll meet at: 

 Bistro 821
821 5th Avenue South
Naples, FL 34102
239-261-5821
www.bistro821.com

Bistro 821 is locally owned and is unique to Naples. The restaurant is located on the trendy, cosmopolitan 5th Avenue South in the heart of historic Olde Naples. It’s a little more than 5 miles from the Waldorf Astoria. To find out more about the 5th Avenue South district check out www.fifthavenuesouth.com.

We have a prix fixe menu for $65 (plus 6% tax and 20% gratuity). Beverages (alcoholic and non-alcoholic) are not included in the $65, but will be included in the total bill. As is customary for our Division dinners, the total bill will be divided by the number of attendees. We expect the total cost to end up around $110/person (it could be a little more depending on how heavily the wine flows that evening, so I’d advise having a couple of extra dollars in your pocket---- just in case).

Thanks to Arlan for making the arrangements.  If you can join us but have not yet confirmed, please be sure to let Arlan and me know ASAP.   I look forward to seeing you there!

Roland Nikles

Tuesday, January 22, 2013

Law Firm Forms Related Entity to Talk the Sustainability Talk

Allyson Pumphrys has formed a consulting partnership, Sustainable Catalyst Partners, LLC, with Indianapolis law firm Drewry Simmons Vornehm LLC to advise owners about sustainability in connection with building projects. Here is her presentation to Division 4 during our monthly call on January 22, 2013:


Friday, January 18, 2013

EJCDC Developing First Form Agreement for PPP


Gerard Cavaluzzi, Vice President and Division Counsel at ARCADIS is a member of our Division 4, and he serves as Chair of the ACEC Legal Counsel Forum and is a member of the Engineers Joint Contract Documents Committee (EJCDC). He reports on some interesting developments:


Gerard Cavaluzzi

EJCDC is working on an all-new standard contract set of documents for public-private partnership (P3). These are believed to be the first standard contracts for P3s for use in the United States. EJCDC’s model P3 documents are being developed primarily for use on mid-sized projects, in the range of approximately $10 million to $50 million.

The 2013 edition of EJCDC’s Construction Documents (“C-Series”) was approved by EJCDC in November 2012 and, after minor editing, will be available in the first quarter of 2013. This update includes significant revisions to many of EJCDC’s C-Series documents, including the flagship EJCDC® C-700, Standard General Conditions of the Construction Contract. In addition ,the C-Series has also been expanded to include the following new, first-issue documents: Suggested Advertisement for Bids, Qualifications Statement, and Construction Subcontract (stipulated price). EJCDC® C-001, Commentary on the C-Series Documents, has been significantly updated and expanded; its content has more than doubled.
In 2013 EJCDC is also updating its Engineering Contracts (“E-Series”) to coordinate with the revisions in the 2013 C-Series documents.

In February 2013 EJCDC will commence reviewing and updating its Design-Build Contract Documents (“D-Series”).

Rounding out a very busy agenda for 2013, EJCDC is commencing the development of an all-new family of documents for third-party construction management (e.g., construction manager as agent or advisor (CMa)) in partnership with CMAA.

Gerard P. Cavaluzzi | Vice President & Division Counsel | gerard.cavaluzzi@arcadis-us.com

Thursday, January 10, 2013

Whither the Highway Trust Fund?

Tamara McNulty directs us to a new report (12/26/12) by Robert Kirk and Tim Mallet, transportation specialists at the Congressional Research Service:  
Federal surface transportation programs are currently funded primarily through taxes on motor fuels that are deposited in the highway trust fund.  Although there has been some modification to the tax system, the tax rates, which are fixed in terms cents per gallon, have not been increased at the federal level since 1993.  Prior to the recession that began in 2007, annual increase in driving, with concomitant increase in fuel use, were sufficient to keep revenues rising steadily.  This is no longer the case.  Future increase in fuel economy standards are expected to suppress motor fuel consumption in the years ahead even if annual increase in vehicle mileage resume.  
Congress has yet to address the surface transportation program's fundamental revenue issues, and has not given serious consideration to raising fuel taxes in recent years.  Instead, Congress has financed the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.s. Treasury general fund.  The most recent reauthorization act, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-112-141), signed by President Barack Obama on July 6, 2012, authorized spending on federal highway and public transportation programs through September 30, 2014 and provided for general fund transfers to finance the programs.  MAP-21 did not address concerns about funding of surface transportation infrastructure.  Among the key points:   
  • Raising motor fuel taxes could provide the highway trust fund with sufficient revenue to fully fund the program in the near term, but it may not be a viable long-term solution due to expected future declines in fuel consumption.  
  • Replacing current motor fuel taxes with a fuel sales tax or a fee based on vehicle miles traveled (VMT) raise a variety of financial and administrative concerns. 
  • The political difficulty of adequately financing the highway trust fund could lead Congress to consider the desirability of changes to maintain the trust fund system or eliminating it altogether.  Such changes might involve a reallocation of responsibilities and obligations among federal, state, and local governments. 
  • Interest in improving transportation infrastructure with private and nontraditional funding sources, such as tolls, public-private partnerships (PPP's), and federal loan programs is increasing, but many projects may not be well suited to alternative financing.  
Tamara McNulty, LEED AP
Senior Counsel
Black & Veatch
Washington D.C.