Friday’s News to Watch

Perhaps because it is the first week of June, this one was a fairly uneventful week for construction news – with one notable exception explored below.

The bigger projects on the market publicly-funded higher education jobs. At Indiana University, bids for the $5 million Dining Café and the $28 million Keith-Leonard Halls are bidding; the $12 million Becht Hall conversion at Clarion is now due on the 20th and Penn State put out the $40 million West Campus Steam Plant. On the private side of the market there are some sub packages out for the $73 million Gardens at Market Square from Turner and interviews are being conducted as part of the construction management selection for the $250 million Chevron office. Google made another splash in the new this week with the announcement that they will be adding another 50,000 square feet to their space at Bakery Square. A. Martini & Co. should be starting work on the space by July.

What was noteworthy this week was Wednesday’s passage of Senate Bill 1, the first salvo from the PA legislature in the effort to increase the funding for infrastructure construction. Following the recommendations of the governor’s Transportation Funding Advisory Commission (TFAC), the Senate used every revenue-creation measure in the 2011 TFAC report to add $1.4 billion to the 2013-2014 budget for bridge/highway work. Five years out, the Senate’s bill would add $2.5 billion to the transportation funding – $1.9 billion of which would go to bridge/highway construction. The biggest source of the funding – and the most controversial – is the lifting of the cap on the wholesale gas tax, which could add 28.5 cents to the price of gas by 2018.

It’s important to remember that TFAC’s conclusion was that it would take an immediate and sustained increase of $3.5 billion each year to catch up and maintain the decay on our state’s bridges and highways (this figure excludes all the infrastructure owned at the municipal level). It’s also worth noting that Gov. Corbett’s response to the TFAC report was to recommend roughly $1.6 billion in increased spending, so there’s quite a bridge to gap between the Senate’s bill and what will ultimately leave the PA House of Representatives. House majority leader Mike Turzai (Rep.) has softened his objections to the revenue sources being tapped in recent weeks, and the Senate’s near unanimous 45-5 vote will certainly get the attention of the House (even the dissent was a bi-partisan 3 Republicans and 2 Democrats). But don’t expect the House version to be anywhere near the Senate’s scale.

What is more likely is that the Senate’s action set the bar high in what will be a spirited political negotiation, with the privatization of the liquor stores as a bargaining chip. With the governor looking for less than three-fourths the increase that the Senate endorsed, the final piece of legislation will probably fall below $2 billion in additional revenue, with maybe half that in the 2013-2014 cycle.

Given that PennDOT’s 2013 lettings will be something over $1.5 billion, even the smallest increase being tossed about in Harrisburg will have a dramatic impact on the heavy and highway sector of the construction industry – and our roads.

Political bargains come much harder these days but with our neighboring states all putting accelerated infrastructure programs in place, PA will be rapidly losing ground in the perception of business conditions (an area in which the state does not exactly shine). What might ultimately win the day is the associated jobs created by the increased construction work. Estimates are that around 50,000 jobs will be created to meet the additional project load. That’s a lot of grateful voters.

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