The Construction Advantage

Trumped Up Infrastructure  [i]

By: Asha Echeverria

Within his first 100 days in office, President Donald J. Trump vowed to deliver a massive infrastructure revitalization package to Congress, fulfilling one of his biggest campaign promises. In his inaugural address, Trump cautioned that the country’s infrastructure has “fallen into disrepair and decay.” He vowed to “build new roads and highways and bridges and airports and tunnels and railways across our wonderful nation.” Now, a year later, President Trump, in his State of the Union address, highlighted his infrastructure plan to rebuild our “crumbling” infrastructure and his intentions to push Congress to approve a $1.5 trillion plan. The President’s $1.5 trillion plan would redirect $200 billion in federal funds to Amtrak and local transit programs over 10 years, with hundreds of millions more coming from cities, states and the private sector.  “Every federal dollar should be leveraged by partnering with state and local governments and – where appropriate – tapping into private sector investment to permanently fix the infrastructure deficit,” Mr. Trump said in his State of the Union address.

In some ways, the administration wasted no time seeking to effectuate its agenda, issuing an Executive Order for Expediting Environmental Reviews and Approvals for High Priority Infrastructure Projects just days after the inauguration. The Executive Order asserts that infrastructure investment “makes America more competitive, creates millions of jobs, increases wages for American workers, and reduces the costs of goods and services for American families and consumers.” According to Brian Pallasch, senior managing director of government relations and infrastructure initiatives at the American Society of Civil Engineers, the U.S.’s failure to maintain its infrastructure costs the average American family $3,400 a year.[ii] The Executive Order states that “[f]ederal infrastructure decisions should be accomplished with maximum efficiency and effectiveness.”  In that vein, the order commissions the Chairman of the White House Council of Environmental Quality (CEQ) to determine whether a state or federal agency’s infrastructure project is “high priority” within thirty days of a request for such a determination based upon the project’s importance to the general welfare, value to the nation, and environmental benefits. For such high priority projects, the CEQ Chairman is to establish expedited procedures and deadlines for completion of environmental reviews and approvals. The Executive Order also requires that each reviewing agency give the highest priority to completing reviews of such projects.

During her confirmation hearing in 2017, Elaine Chao, nominee to lead the Department of Transportation, reinforced the President’s call to revitalize U.S. roads, bridges, and airports, telling the panel that one of her top priorities will be to establish an infrastructure task force. Trump and Chao are yet to provide any concrete details of their plans but with many other priorities before Congress and the hesitancy of conservative Congressional Republicans to increase spending, passage of a Congressional bill authorizing major infrastructure investment slipped far beyond the first 100 days.

Timing

According to key transportation lawmakers, including Speaker of the House Paul Ryan (R-Wis.), infrastructure legislation was part of the 2017 agenda, and, at least at the time, the expectation was that a bill would be before the President by the August 2017 recess.[iii]  According to Rep. Bill Shuster (R-Pa.), Chairman of the House Transportation Committee, Congress was going to use the first 100 days to explore ways to pay for the infrastructure package and “[t]hen in the next second 100 days is when we’ll put together a big infrastructure package.”[iv] Rep. Sam Graves (R-Mo.), head of the House Transportation subcommittee on highways and transit, similarly set the timing as “sometime this summer” 2017.[v]

In January 2017, Senate minority leader Charles Schumer (D-NY) and Sen. Bernie Sanders (I-Vt.) introduced a $1 trillion infrastructure spending bill to revitalize our nation’s airports, bridges, roads, seaports and energy grid, which the Democrats claim would create 15 million jobs over 10 years. The Democratic-sponsored bill failed, but appeared to evidence support from across the aisle for the President’s initiative; marshaling conservative Republican support for the large spending bill may be the greater challenge for the administration.

Though Trump may issue the proposal, many are skeptical whether adequate support exists even in the Republican caucus, given the many deficit-hawks, to meaningfully fund an infrastructure program. The opportunity for real gains in this area may have passed when funding was not included in the tax bill.[vi] “Nothing happened this year, so the prospects of anything happening next year I think are pretty slim,” said Republican Ray LaHood, former transportation secretary under President Barack Obama, who is now a co-chairman of Building America’s Future, a bipartisan coalition that promotes infrastructure.[vii] Others are “cautiously optimistic” about 2018, including Michael Burke, chairman and chief executive of AECOM, the world’s biggest engineering firm.[viii]

Projects

In December 2016, the Trump administration provided the nation’s governors with a list of fifty sample projects around the country that could be funded by the proposed infrastructure package. The administration’s list included rehabilitation of major airports, rail stations, and bridges around the country. “Every single governor in this nation has roads, bridges, tunnels, airports and more that could be repaired or replaced – creating jobs and economic opportunity along the way,” said Virginia Governor Terry McAuliffe (D), chairman of the National Governors Association, a non-partisan organization. The governors were then invited by the National Governors Association to respond and provided the administration with a list of more than 300 proposed infrastructure projects. The governors presented a wide variety on their “wish list”, from highway widening projects from Louisiana to Texas and a $7 billion light rail expansion in Washington State. The National Governors Association characterized the effort as “an initial information gathering request.” In a letter, the National Governors Association indicated that it expected the “initial spend” on projects in 2017 to be $150 billion.

Regulations

Chao also indicated that the administration is looking to streamline regulations for infrastructure projects. Rep. Shuster referenced hundreds of regulations that should be rolled back, specifically citing “Waters of the United States is the first one, and I think that’s one of those [the President] can [undo] with the stroke of a pen.”[ix] 

Funding

Though Trump has called for investment ranging from $500 billion to $1 trillion in early 2017, Rep. Mark Walker (R-N.C.), the new chairman of the conservative Republican Study Committee, expressed reservations mirroring those of Rep. Graves who said, “We just simply can’t afford it,” even “through public-private partnerships that the [President] is talking about.” Chao acknowledged this concern before the Senate Commerce, Science and Transportation Committee stating, “The government does not have the resources to address all the infrastructure needs in our country.”

Chao asserted that the Highway Trust Fund, the major funding source for federal surface transportation projects through taxes on gas and diesel, is inadequate and will be insolvent by 2021. Chao encouraged lawmakers to develop new funding options to maintain our current infrastructure and pay for the Trump administration’s revitalization efforts. Though Chao indicated in her confirmation hearing that the administration would likely propose some form of direct investment by the federal government, a package of the magnitude Trump has suggested will still likely require extensive private investment to gain the support of Congressional Republicans. To understand the magnitude, a Trump campaign white paper indicated that $167 billion in federal spending could be leveraged to create $1 trillion in works when combined with private investment. Trump has argued that public-private partnerships, in which private entities bid on a project, build and maintain it for a set number of years, and recover costs through tolls or set state payments, are cheaper and quicker than works completed by the federal government. Before the Committee, Chao reiterated that “innovative financing tools”, including tax breaks, could produce trillions in private investment from equity firms, pension funds, and endowments.

Overall, only time will tell what shape the infrastructure bill will take, but given the recent leaks from the White House, it may not be long before we know the full scope of the President’s proposal – so “stay tuned.”

[i] This article initially appeared as follows: Asha A. Echeverria & Brian R. Zimmerman, Construction Bills: Recent Changes in Construction Laws, The Construction Lawyer, (Vol. 37, No. 2, Spring 2017). It has been updated here by one of the authors.

[ii] Ellen Powell, Democrats’ $1 trillion infrastructure plan: A political bridge to Trump?, Christian Science Monitor, (Jan. 24, 2017), http://www.csmonitor.com/USA/Politics/2017/0124/Democrats-1-trillion-infrastructure-plan-A-political-bridge-to-Trump.

[iii] Melanie Zanona, Trump’s infrastructure plan: What we know, The Hill (Jan. 13, 2017), http://thehill.com/policy/transportation/314095-trumps-infrastructure-plan-what-we-know

[iv] Id.

[v] Id.

[vi] Mark Niquette, Trump to Release Infrastructure Plain in January, Official Says, Bloomberg, (Dec. 7, 2017), https://www.bloomberg.com/news/articles/2017-12-07/trump-is-said-to-ready-infrastructure-plan-for-january-release.

[vii] Id.

[viii] Id.

[ix] Melanie Zanona, Trump’s infrastructure plan: What we know, The Hill (Jan. 13, 2017), http://thehill.com/policy/transportation/314095-trumps-infrastructure-plan-what-we-know. 

Buyers Beware, Contractors Relax: New Jersey Tightens the Time in Which to Bring a Lawsuit on a Construction Defect

By: Zachary Brandwein

Recently purchased a property? Discovered a construction defect? Your time to bring a lawsuit based on the defect may be quickly expiring.

In a recent decision, the New Jersey Supreme Court held that the statute of limitations for construction defects begins to run when any owner, whether current or prior, knew or reasonably should have known of a defect. Although this ruling is not applicable to disputes in ME courts, it offers a potential preview of how a ME court might rule in a similar situation.

In The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, et al., the project in question was completed in 2002. The project was operated as a rental property for two years. In 2004, the property was sold and the new owner converted it to condominiums. An engineering report prepared in connection with the conversion determined the building to be in generally good condition. The conversion also established a condominium association which operated and managed the condominium.

Over time, and pursuant to New Jersey law, as the units were conveyed, the condominium owners assumed ownership of the building. In 2006, the owners, acting through their association, finally took full ownership of the building. The owners then retained their own engineering firm to evaluate the property. The new report was completed in 2007, and identified a number of construction defects.

In 2009, the owners filed a complaint against a number of parties, including contractors and subcontractors on the project. The subcontractor defendants argued that the owners’ suit was time-barred by New Jersey’s statute of limitations. The owners’ countered, arguing that the clock on their claim only started to run when they received their engineering report in 2007.

The New Jersey Supreme Court held that the statute of limitations on a claim begins to run on the date on which the earliest owner knew or should have known, through the exercise of reasonable diligence, of the defect. If a prior owner knew or should have known about the defect, a subsequent owner is imputed with the same knowledge. The Court remanded the case for more factual findings, but its ruling has major implications for both property buyers and contractors.

The concern for the buyer of a previously owned property is that the buyer’s time to bring a lawsuit may have already started to run or may have even expired. If a prior owner either knew or should have known of a construction defect and did not bring suit, the subsequent buyer’s claim may be time-barred.

For contractors and subcontractors, this new rule offers some protection and certainty that their exposure to a suit will not continue indefinitely. Each new change in ownership of the property will not renew the statute of limitations.

It remains to be seen whether other states like ME will adopt this standard, but the issue bears watching.