Construction Today - January 2010 - (Page 218)
SPECIAL FOCUS Industrial ON THE RIGHT PATH Will the stimulus bill accomplish what the Obama administration set out to do? BY J. GRAHAM NOYES N In This Section 220 CANA: SMART Technologies HQ 223 Difazio Industries 226 Ecco III 229 G.W. Peoples 232 Arco Murray 234 Baker Electric Inc. 236 Chester Brothers 238 Titan Wrecking ov. 17, 2009, marked the nine-month anniversary of President Obama signing the American Recovery and Reinvestment Act of 2009 – commonly referred to as the stimulus bill. Now is an appropriate time to assess progress toward the stimulus bill’s goals of stimulating the economy, creating jobs and fueling American leadership of a 21st-century clean-energy economy. While establishing cause and effect between legislative policy and economic impact is inevitably imprecise, there are strong indicators the administration has successfully passed the early milestones en route to its ultimate goals, with plenty of challenges still lurking ahead. A review of one of the most critical programs, the $6 billion Department of Energy (DOE) loan guarantee program, illustrates the path to date and the remaining hurdles to success. A consideration of the nature of government programs and project finance quickly establishes that the loan guarantee program is inherently ill-suited for providing immediate economic growth. To operate, a complex government program requires extensive rules and regulations that are written not by Congress but by the executive agency itself. Once written, the rules are subject to public review and comment. The prior DOE loan guarantee program was already well-funded with close to $10 billion from the Energy Policy Act of 2005. The program was moribund, however, with DOE either unwilling to approve or incapable of approving any projects during the program’s three-year lifespan. Since the passage of the stimulus bill, DOE has aggressively revitalized the program by rewriting the rules, expanding the program staff, soliciting and integrating private-sector input to create the Financial Institution Partnership Program (FIPP), and releasing a series of solicitations. These solicitations have included renewable energy projects and projects to modernize the transmission grid, and they have captured the interest of the financial community. Project finance presents its own series of challenges to an administration seeking to stimulate the American economy and create jobs in the short term. The project finance model requires solid projects with minimal risk that can generate a reliable return on investment. To determine whether a project meets these criteria, extensive due diligence is required. During the period of financial crisis that gripped the nation beginning in 2007, investment dried up in virtually all sectors, including project finance for renewable energy projects. This is noteworthy not just from a renewable energy perspective but from an overall U.S. energy supply perspective, because renewable energy projects became the largest source of new generating capacity in the United States in 2007. The intention behind the DOE loan guarantee was to guarantee up to 80 percent of the debt on a qualified project so that lenders would return to the marketplace. The coupling of a complicated federal program with a skittish lending community creates a time-consuming sequence, where the government first funds the program, then establishes the regulations, then finalizes the regulations, then issues solicitations. After that, the private sector analyzes the program, specific projects can be brought forth and subjected to due diligence, projects can be found to qualify for the program on a preliminary basis, and various permitting and contracting steps can be fulfilled, so ultimately a closing can occur and the project can move forward. It should be no surprise that the Loan Guarantee Project has done little to directly stimulate the economy and thus far has created few jobs outside of DOE employees, consultants and lawyers. However, the funding of the loan guarantee program can be credited with having significant impact in stimulating the economy. This is attributable not to the program itself but to its funding pool, which was raided for $2 billion to fund the Cash for Clunkers program. The Cash for Clunkers program is largely credited for driving a full 1 percent of the overall 3.5 percent expansion of the U.S. economy in the third quarter. Although it may have been simple expediency that determined which program funds were “borrowed,” the Loan Guarantee Program did make sense from a timing perspective in that the program will not actually tap into its funds for years to come because of the necessarily slow approval process. The overall 3.5 percent annualized growth rate in the third quarter marked the first growth quarter for the country after four successive quarters of a shrinking economy. While open to a causation debate, this performance does support a finding that the stimulus bill succeeded overall in its primary goal of restarting the U.S. economy. CONSTRUCTION-TODAY.COM JANUARY 2010
Table of Contents for the Digital Edition of Construction Today - January 2010
Construction Today - January 2010
Metrus Construction Limited: Le Parc Tower II
CJ Pink Ltd.
Costello Dismantling Co. Inc.
Allied Building Products Corp.
IDEURBAN: The St. Regis Mexico City
Jersen Construction Group
Killian Construction Co.: The Westin Hotel
Legacy Partners Residential: Riverpark
Strathcona Mechanical Ltd.
Tilton Pacific Construction Inc.
On the Cover
Product Showcase: Software and New Technology
Nicholson Construction Co.
Gilchrist Construction Co.
Turner Construction Co.: MIC Rental Car Center
Union Concrete Construction: Outer Harbor Parkway Project
D’Onofrio General Contractors Corp.
Worldwide Rental Services
AmQuip Crane Corp.
EIC Associates Inc.
Intercounty Paving Associates LLC: N.Y. Route 112
Matrix Design Group
Nicholson Construction Co.: Canton Dam
Wilson & Company Inc. Engineers and Architects: Rail Division
Group Lepine Ltd.
Laurysen Kitchens Ltd.
Aspen Ridge Homes: Vu Living
Walsh Construction: Sherman Replacement Hospital
PortSide Builders Inc.
Summit Builders Construction Co.: Classic Residence at Silverstone
Keystone Construction Corp.: Carmel Arts District Lofts
HDR Architecture Inc.
Brasfield & Gorrie LLC
Dimeo Construction Co.
EllisDon: North Park Quad Pad Arena
CANA Construction: TELUS World of Science
Cornerstone General Contractors Inc.
Harvey-Cleary Builders: City of Austin Public Safety Training Facility
Hensel Phelps Construction Co.: Granada Hills High School
Pirtle Construction Co.: City of Miami College
Sundt: East Contra Costa
Taylor & Parrish Inc.: Carole Weinstein International Center
Turner Construction Co.: Nationwide Children's Hospital
Turner Construction Co.: Duval Unified County Courthouse Facility
Weddle Brothers Construction Co. Inc.
AP Construction Inc.: Kensington Creative and Performing Arts High School
The Boldt Co.: Luther Midelfort Hospital Expansion
Choate Construction: NGCSU Projects
Donley’s LLC: Bavaro Hall at the University of Virginia
EllisDon: Woodstock General Hospital
McCarty Corp.: Maneuver Center of Excellence Headquarters
Munlake Contractors Inc.
Murray Company: Kiowa Country Memorial Hospital
River City Construction LLC
Skyline Roofing Ltd.
SpawGlass: Austin Community College Round Rock Campus
W.E. O’Neil Construction: Downtown Women's Center Project
CANA Construction: SMART Technologies
Ecco III Enterprises Inc.
G.W. Peoples Contracting Co.
ARCO/Murray National Construction Co. Inc.
Baker Electric Inc.
Chester Bross Construction Co.
Titan Wrecking & Environmental LLC
Last Look: Urban Landmarks
Construction Today - January 2010