January 6, 2009 / 6:24 PM / 9 years ago

Show us the money: shovel-ready projects set to go

By Nick Carey - Analysis

CHICAGO (Reuters) - If President-elect Barack Obama’s economic stimulus plan makes it through the U.S. Congress, money designated for infrastructure could start flowing within months into scores of “shovel-ready” projects stalled due to a lack of funds.

But accessing cash is just the first step. Industry experts warned that a lasting solution to America’s infrastructure problems -- an aging, congested highway system, for starters -- will take far longer to implement.

”We must save the patient first, then think about long-term strategy,“ said Richard Little, director at the University of Southern California’s Keston Institute for Public Finance and Infrastructure Policy. ”If the objective is to create jobs, we should focus on projects that are ready to go.

“But, within a year, we’ll start to see demands for a comprehensive national approach to infrastructure,” he added.

Before any money can be spent, however, Obama’s stimulus plan -- up to $775 billion including as much as $310 billion in tax breaks for businesses and the middle class -- must make it through Congress.

A large portion would go toward infrastructure -- highways, bridges, railways -- which would make this the largest such plan since the U.S. Interstate highway system was created under President Dwight Eisenhower in the 1950s.

Obama has said he wants to sign a bill approving his plan shortly after taking office on January 20.

As the Democrats are a few votes short of the 60 required in the 100-seat Senate to advance legislation, the Republicans could slow passage of the bill and have raised concerns about waste, warning the cost could reach $1 trillion.

“Can the Republicans hold things up for a while? Maybe,” said Polly Trottenberg, executive director of Building America’s Future, a group founded by New York Mayor Michael Bloomberg, Pennsylvania Governor Edward Rendell and California Governor Arnold Schwarzenegger. “But the competing pressure is Americans are scared, so we’ll see how long opposition lasts.”

THE ‘NOT VERY SEXY’ OPTION

Once the stimulus makes it through Congress, there is no shortage of municipalities and states around the country already looking for money for infrastructure projects.

A report released by the U.S. Conference of Mayors entitled “Ready to Go” in early December listed more than 11,000 projects in 427 cities, many of which already have local approval.

The total cost for the projects -- everything from a $100,000 driving simulator for Goodyear, Arizona to a $20 million expansion of a housing complex for the elderly in West Hartford, Connecticut -- would be nearly $73.2 billion and they would create more than 800,000 jobs, according to the group.

Another term often used for projects that are approved, but need money is “shovel-ready.”

“I am sure there are plenty of shovel-ready projects out there, but where I would invest in is repairing and maintaining existing highways and transit systems,” Lance Grenzeback, senior vice president at Cambridge, Massachusetts-based transportation consulting firm Cambridge Systematics Inc.

Building America’s Future’s Trottenberg said maintenance programs for roads and bridges also do not require much in the way of planning or approval and could be rolled out quickly.

“These programs are not very sexy, but they’re very important,” she said. “But they don’t require any right of way decisions and they can be used to create jobs quickly.”

Infrastructure experts point out that public works in many states have stalled for lack of funding and could easily be restarted with an injection of cash.

“The municipal debt situation in California in particular is a mess and a lot of construction projects are on hold,” the Keston Institute’s Little said. “Rather than start new projects, it makes more sense to finish what we’ve started.”

Companies, such as Astec Industries Inc, that focus almost exclusively on road construction equipment should get an early boost from highway projects, according to Mathew Christy, an analyst at Standard & Poor’s Equity Research. Others, such as mining and building equipment maker Terex Corp with a broader mix of operations, will also benefit, but less so.

‘KEEP IT SIMPLE’

According to an aide in the Obama transition camp, the stimulus plan will focus on projects that are “already in the pipeline” or restarting stalled projects.

The incoming administration will also place great emphasis on accountability and transparency when it comes to using taxpayers’ dollars on infrastructure projects, the aide said.

Kenneth Simonson, chief economist of The Associated General Contractors of America, said the U.S. construction industry is ready to handle extra projects, but there is concern Congress will add too many conditions to the federal money.

“If Congress adds new restrictions, this will create new problems because local governments and construction companies will have to familiarize themselves with new rules,” Simonson said. “We want the new administration to keep things simple and keep them familiar or things are going to move very slowly.”

Editing by Patrick Fitzgibbons and Andre Grenon

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