Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

The Commonwealth of Virginia has been slow to apply for, award and perform contracts funded by the federal American Recovery and Reinvestment Act (ARRA, better known as the Stimulus bill).  As the construction industry has suffered through plummeting bidding numbers and 25% national unemployment, Virginia has lagged in even qualifying its projects for funding, let alone getting the money to work.  The bad news is this has slowed down much needed funding.  The good news is it looks like there is a lot more money coming down the pike into the economy in Virginia.

A recent report by Peter Bacque of the Richmond Times Dispatch indicated that federal legislation provided $694.5 million in federal transportation stimulus funding and that less than half that has even been awarded in contracts.  Mr. Bacque indicates the money spent to date has produced 454.4 full time jobs.  This contrasts with the reported job creation in Virginia for US Department of Transportation which sets jobs created or saved at 1,335.54.  Thus, the confusion over job creation and funding that we have previously discussed continues.  Based on the funding numbers, the USDOT funding is clearly not the only agency source of transportation funding for Virginia as there is a minimum of another $100 million in funding.

The more important story is that while half the projects may be under contract, most of the projects have not even begun yet.   The Virginia website reporting on stimulus projects indicates that the total figure for both direct and indirect transportation funding administered through VDOT is $812 million.  VDOT has its own separate site with an ARRA project tracking sheet updated on February 24, 2010.  Call me a glutton for punishment, but I translated that project tracking sheet into a Microsoft Excel document available here.  The tracking sheet describes the percentage complete and I did a calculation of spending of ARRA funds by percentage of project completion.  If that percentage tracks with dollars actually spent, the VDOT site documents only roughly $66 million spent. 

There is an additional $175 million in projects that are either managed by other agencies or do not include a percentage allocation from VDOT.  The roughly $57 million allocated to the Fairfax County Parkway appears allocated and contracted, but the construction appears in its early phases.  Another $52 million is associated with projects in Washington and Roanoke County which are described as having anticipated contracts in May and June 2010.  Finally, it appears that VDOT got a late certification for ARRA funds totalling $70 million for I-66 Pavement Rehabilitation and Reconstruction which clearly has not started yet.  Thus, it appears that little of the $175 million that was not classified by project completion percentage has been spent yet either.  For those in Fairfax, $120 million in future funding is obviously a boon to our transportation woes as well.

It may be that my rough estimate of funds spent based on project completion is not accurate; however, I think we can still draw some reasonable conclusions regarding stimulus transportation funding in Virginia:

• While Virginia was late to the table in applying and certifying its projects, it appears that it got its work done on deadline to qualify for the ARRA funding;
• Many projects have not started yet;
• The bulk of funding has not streamed into many projects yet, meaning the bulk of the stimulus funding impact may be felt over the next twelve months;
• Based on timing of payment applications, payment flow contractors, subcontractors, suppliers and manufacturers will lag even further behind;
• Based on the foregoing, we should view estimates of jobs created or saved by stimulus funding as pure estimates until the funds actually hit the street.

Image by Sarah Rifaat

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Today we tip our toe, quite gingerly we might add, into the ugly place where preliminary statistics and politics meet. In the last week, print news and the internet have been awash with reports on stimulus spending today and estimates of the impact that spending has had a jobs created or saved. In particular, Chris Thorman and Don Fornes of Construction Software Advice have culled through the quarterly reports which are publicly available at www.recovery.gov and provided a detailed state-by-state breakdown of construction stimulus spending amounts awarded, amounts "received", jobs created and the cost per job (this article was also posted to ENR's blog and both have separate comments).

In general, the "cost per job" analysis of stimulus funding has triggered political ugliness reaching internet meme proportions. The "Usual Suspects" have regularly weighed in to the debate. In January, Rep. John Boehner (R-OH) ripped into the stimulus spending arguing that "the plan would spend a whopping $275,000 in taxpayer dollars for every new job it aims to create". In reply, economist Paul Krugman called Boehner's approach a "bogus talking point" that "involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years." With the latest quarterly numbers, the political machines for both sides have cranked up and marched out the latest updated versions of the talking points. We will leave it to our individual readers to decide whether the "Usual Suspects" refers to the motley line-up crew from Casablanca or Keyser Soze.

On a regional level, the data from Construction Software Advice provides some real points of interest. First, comparing amounts awarded to amounts received, there is a huge divergence amongst Maryland, Virginia and the District of Columbia in the flow of money. Maryland has "received" close to half the awarded funding. Virginia has received only 34%. The District has only received 5.5% of the $1,900,000,000 awarded (the most regionally). This tells us that in terms of the DC region, a huge amount of the money has not even been "received" yet and we can expect continuing economic impact, particularly from the DC projects. The underlying data may also face significant adjustment over time as corrections and changes are made, a reality that even the Recovery.gov site recognizes on-going data correction impacts the analysis. The precise measurement of jobs "created or saved", especially indirect jobs, appears to very difficult if not impossible.

It strikes us that at some point, a post mortem on cost per job will be appropriate and necessary, but at this stage it is difficult if not impossible for that exercise to be meaningful. Construction jobs in particular involve significant ramp up and as such stimulus funding that may have initiated the project will likely not see full employment fruition of jobs created or saved for some time. The Construction Software Advice report expressly recognizes these limitations stating, "With 76,214 jobs created/saved during this reporting period, the number will undoubtedly go up in future months as more projects begin and as more projects enter more labor-intensive phases." What we take from this information is that there are a lot of stimulus dollars, in particular construction stimulus dollars, in particular in this region, that have yet to be spent.  (Hat tip to our friend Rob Geedra from Geedra.com for passing along this link).

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