[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
SUBCOMMITTEE HEARING ON
THE UPCOMING HIGHWAY BILL
AND ENSURING IT MEETS THE
NEEDS OF SMALL BUSINESSES
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JULY 16, 2009
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-037
Available via the GPO Website: http://www.access.gpo.gov/congress/house
U.S. GOVERNMENT PRINTING OFFICE
50-949 WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
STANDING SUBCOMMITTEE
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama
(iii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Altmire, Hon. Jason.............................................. 1
Fallin, Hon. Mary................................................ 2
WITNESSES
Mills, Mr. John M., President & Treasurer, Plum Contracting, Inc.
Greensburg, PA. On behalf of Associated General Contractors.... 5
Kirchhoff, Mr. Tom, Executive Vice President & COO, Cleveland
Brothers Equipment Co., Inc., Harrisburg, PA. On behalf of
Associated Equipment Distributors.............................. 7
Robinson, Mr. Rob, Chairman, Urban Design Associates, Pittsburgh,
PA. On behalf of the American Institute of Architects.......... 10
Martin, Mr. Rod, Vice President, Martin Stone Quarries, Inc.,
Bechtelsville, PA. On behalf of National Stone, Sand & Gravel
Association.................................................... 12
Ross, Mr. Henry A., Director of Sales and Marketing, USA-SIGN,
Chairman, American Traffic Safety Services Association, Elmira,
NY............................................................. 13
Filipczak, Mr. Michael, President, Midasco LLC, Elkridge, MD. On
behalf of the American Road & Transportation Builders
Association.................................................... 15
APPENDIX
Prepared Statements:
Altmire, Hon. Jason.............................................. 27
Fallin, Hon. Mary................................................ 29
Mills, Mr. John M., President & Treasurer, Plum Contracting, Inc.
Greensburg, PA. On behalf of Associated General Contractors.... 31
Kirchhoff, Mr. Tom, Executive Vice President & COO, Cleveland
Brothers Equipment Co., Inc., Harrisburg, PA. On behalf of
Associated Equipment Distributors.............................. 40
Robinson, Mr. Rob, Chairman, Urban Design Associates, Pittsburgh,
PA. On behalf of the American Institute of Architects.......... 50
Martin, Mr. Rod, Vice President, Martin Stone Quarries, Inc.,
Bechtelsville, PA. On behalf of National Stone, Sand & Gravel
Association.................................................... 59
Ross, Mr. Henry A., Director of Sales and Marketing, USA-SIGN,
Chairman, American Traffic Safety Services Association, Elmira,
NY............................................................. 66
Filipczak, Mr. Michael, President, Midasco LLC, Elkridge, MD. On
behalf of the American Road & Transportation Builders
Association.................................................... 71
Statements for the Record:
"Traffic Congestion Slows Down Small Business and Adds Cost" by
Arnie Consdorf................................................. 83
American Council of Engineering Companies........................ 85
(v)
SUBCOMMITTEE ON INVESTIGATIONS
AND OVERSIGHT HEARING ON THE
UPCOMING HIGHWAY BILL AND ENSURING
IT MEETS THE NEEDS OF SMALL BUSINESSES
----------
Thursday, July 16, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:06 a.m., in
Room 2360, Rayburn House Office Building, Hon. Jason Altmire
[chairman of the Subcommittee] presiding.
Present: Representatives Altmire and Fallin.
Also Present: Representative Shuster.
Chairman Altmire. I now call this hearing to order.
I would like to begin by asking unanimous consent that we
allow Congressman Shuster and any other members outside the
Committee who would like to sit in. So, without objection,
welcome back, Congressman Shuster. And thank you for being
here.
In the decades since the first interstate was poured in the
1950s, our highways and bridges have become crucial arteries of
commerce. Much of this infrastructure was built through the
ingenuity and hard work of our Nation's small businesses. Given
the role that entrepreneurs have played in the creation of our
highway system, it only makes sense that as Congress begins
work to reauthorize the Federal highway bill, we take small
business priorities into account.
Today's hearing will examine whether our transportation
system is meeting the needs of our entrepreneurs. We are also
going to look for ways to ensure small businesses continue to
be the cornerstones of America's infrastructure. The
reauthorization of the highway bill is not just a matter of
building roads and bridges; it gives us an opportunity to
revive our economy with new job creations. The benefits of this
growth would be felt both immediately, but also for decades to
come.
There are several infrastructure challenges which, if
properly addressed, will help our economy to grow and thrive.
Traffic congestion, for example, is an issue which touches our
lives on a daily basis. Easing congestion would lead to lower
shipping costs and improve productivity. Every year, gridlock
eats up 4.2 billion hours and wastes 2.8 billion gallons of
fuel. These costs are taking $87.2 billion out of our economy
each year. Just think what a powerful boost we could give
entrepreneurs if we were able to recapture those dollars and
invest them back into small firms.
No other sector of the economy is more uniquely positioned
to tackle infrastructure challenges than our Nation's
entrepreneurs. The American Recovery and Reinvestment Act, with
nearly 5,500 projects already authorized, is a big step that
will go a long way in helping small firms grow. We need to make
sure that the highway bill builds off of that important
initiative and that it does so in a way that benefits both
entrepreneurs who use our roads and the small contractors who
construct them.
Today, as in the era when our highway system was first
created, it will be entrepreneurs in the fields like
architecture, engineering, and construction who lead the charge
in rebuilding and modernizing our infrastructure. But these
projects are not easy solutions. They will require long-term
planning and investment in a myriad of different areas. Without
adequate funding and fair competition, small firms won't be
able to offer the innovative systems and cost-efficient
technologies that would otherwise benefit every community in
this Nation.
A long-term surface transportation reauthorization has the
potential to provide that long-term vision and foundation. It
holds the promise of creating jobs that put people back to work
improving our Nation's infrastructure. In fact, the Federal
Highway Administration estimates that every $1 billion in
highway capital leads to 30,000 jobs and $1.1 billion in
employment and wages. This multiplies the benefit of each
Federal dollar spent, growing our economy and leaving our
country with lasting economic gains. We need a transportation
system that increases both our economic strength and our
competitive edge in the global marketplace.
In my district in western Pennsylvania, and all across the
country, we have roads and bridges that are in critical need of
repair. Going forward, the highway reauthorization bill will be
a critical vehicle for our entrepreneurs as they work to
improve our infrastructure and rebuild our economy.
[The statement of Chairman Altmire is included in the
appendix.]
Chairman Altmire. I would like to thank all of our
witnesses today in advance for their informed testimony. And,
with that, I yield to Ranking Member Fallin from Oklahoma for
her opening statement.
Ms. Fallin. Thank you, Mr. Chairman. And may I just say
thank you for holding this hearing today. We appreciate all of
our witnesses that have joined us. Thank you for taking time
away from your busy schedules to be with us to share your
knowledge and interests and solutions and even concerns about
our highway infrastructure and how we are going to pay for this
highway reauthorization bill.
And as has been mentioned already, a Federal requirement
for all modern economies is a safe and efficient transportation
system. Many businesses depend upon a transportation system to
obtain needed materials and labor to send goods and services to
market and to consumers. Every household depends upon
transportation systems for access to work, shopping, medical
care, food, family, and entertainment. According to the Bureau
of Transportation Statistics, the average household spends more
on transportation-related expenses than health care and food.
The Federal Highway Administration, when we look at the
delivery of products and services, also estimates the volume of
freight shipments will triple by 2035 to almost $42 million in
constant dollars, with 24 trillion of that carried by truck,
and 9 billion intermodal combinations that include trucks. That
growth will put an enormous pressure on every element of our
transportation system.
And I want to just address real quickly, knowing that all
of you are small business owners, that I think there is great
concern here in Congress about how are we going to pay for our
next highway reauthorization bill. What impact will it have
upon small businesses, upon your profits, upon your margins,
upon just the cost of delivering your products and your
services?
And I think all of you are aware that this year we face
some economic challenges within our economy. We have been
talking about how to best address our recession. How can we
best jump-start our national economy? How can we work with
putting our money wisely where it needs to go here in Congress?
We have had several different types of initiatives that we have
taken here in Congress. There has been the bailout package
which cost the taxpayers more than $7 billion. We passed the
stimulus package which pumped in another $780 billion. We have
had an omnibus appropriation bill which cost our taxpayers $410
billion. And, of course, now we are talking about a national
climate change bill and also health care reform.
So when you take all of this spending that has been going
on here in Washington, D.C., and now we are talking about
infrastructure and its importance to our economy and to small
businesses, the question is: How are we going to fund that? And
of course we know that our highway reauthorization trust fund
has run into deficits, and we have had to take general revenue
funds to shore up that money so that when the money goes back
to the States they can pay their contractors and suppliers.
So I guess the question we want to hear from you today is:
What are your concerns as we look forth in our economy, as we
look forth in small businesses, to help you be successful? And
how can we best use our taxpayer dollars to build upon an
infrastructure system that is so critical to our small
businesses and so critical to our economy?
The Chairman mentioned some of the concerns that affect our
small businesses, whether it is congestion, whether it is
looking at ways of funding our next highway reauthorization
bill, and how are we going to do that. The draft highway bill
that we are going to be seeing soon does have different ways of
paying for the next highway reauthorization package, but it
also expands into several different areas that I personally
have concern about. It creates a National Infrastructure Bank,
an Office of Public Benefit, an Office of Livability, just to
name a few.
And when we are talking about new elements that we are
adding into our highway reauthorization bill at a time when
money is scarce and when we need to invest in our
infrastructure--which I am all for--I think we have the
obligation as Members of Congress to be very good stewards with
our taxpayer dollars to put that money exactly where it needs
to go, where it will benefit our economy first and foremost so
we can get this economy moving again and create those jobs and
create an atmosphere to where you want to invest your money
back into your businesses and create those jobs.
So I am looking forward to hearing your testimony. I will
tell you that as we consider our next highway reauthorization
bill--and Chairman Altmire and I are both on the Transportation
Committee--that I am concerned about the effect of any type of
taxes that may be increased, especially on small businesses
with fuel charges. It would affect your delivery of products
and services, because those costs have to be passed on down to
the consumers and to the other suppliers that you work with.
We have talked about raising the gas tax, the mileage tax.
We have talked about Davis-Bacon, prevailing wages. All those
things have been mentioned as we talk about how are we going to
fund our next highway transportation bill and what will be in
the bill itself.
So thank you all for coming today. I hope that we can all
work together here in Congress to build a responsible and cost-
efficient way to sustain our national transportation needs and
promote measures that will allow our transportation projects to
be completed and, hopefully, in a way that doesn't overburden
the construction of those services with too much red tape from
our government. So I appreciate you coming here today.
Mr. Chairman, I yield back my time.
[The statement of Ranking Member Fallin is included in the
appendix.]
Chairman Altmire. Congressman Shuster.
Mr. Shuster. Thank you, Mr. Chairman, for allowing me to
sit in on the Committee today. I was on the Small Business
Committee for four terms. This is the first term I haven't
been. They were able to find my old name tag so they didn't
have to make one up. I appreciate that. I am sure it was in the
bottom of the box with a little dust on it. So thank you for
letting me sit in.
I want to welcome all of the people here testifying today,
especially Tom Kirchhoff, who is Executive Vice President and
COO of Cleveland Brothers Equipment, in the Ninth District and
sells a lot of equipment into the Ninth District. We appreciate
that greatly and what you do.
I want to echo what my colleagues have said about the
importance of the highway authorization bill. It is important
to the economy of the United States, it is important to small
businesses to be able to get some consistency, to be able to
plan over the next 6 years what they are going to do in their
businesses to expand them, contract. And what are you going to
do with employees? I have heard story after story how companies
in this economy don't really want to lay off people, because
when the economy turns or when we pass a highway bill we want
to have the people in place, whether it is people in the
quarries or on road crews or in places like Cleveland Brothers,
mechanics being able to fix the equipment.
So I know it is a struggle not knowing what is going to
happen. I think an 18-month extension is not the best thing for
the economy or businesses, especially small businesses.
I do have to say the stimulus bill that I was not in favor
of has not got the money out as fast as we thought it would or
hoped it would or were told it would. Although in Pennsylvania,
it is the one shining example of where money seems to be
flowing out. I know Secretary LaHood uses Pennsylvania. When
they ask about the stimulus bill, he points to Pennsylvania. So
we are doing something right in Pennsylvania when it comes to
getting the money out to infrastructure jobs.
And as my colleague from Oklahoma said, the $450 billion
question is: Where are we going to get the money? And I think
you have to look at it in all places, whether it is the public-
private partnerships, tolling, looking at the user fees.
Somebody has got to pay for it. It is not magic. Sometimes as
politicians we get out there and say we want to do this and do
that, but at the end of the day somebody has to pay. And who
always pays is the American people. So we want to go about it
in a fair and equitable way that we get the best bang for our
buck.
So again I thank all of you for being here and taking your
time to come to Washington. And, again, Mr. Chairman, thank you
for allowing me to sit in on this. Thank you.
Chairman. Altmire. We will now move into the testimony. For
those who have not testified before, we have a light system
there. You will each have 5 minutes to give your remarks. It is
right in the middle of that table there. The green light means
you are good. The yellow light means you have 1 minute
remaining. And the red light means you are done; start to
summarize and wrap up. And then we are going to get into the
questions.
So we are going to begin by introducing Mr. John M. Mills.
Mr. Mills is President and Treasurer of Plum Contracting,
Incorporated, located in Greensburg, Pennsylvania. Plum
Contracting is in highway groups and a utility contractor. Mr.
Mills is here to testify on behalf of Associated General
Contractors of America. Founded in 1918, AGC represents more
than 32,000 firms in the contracting industry.
Chairman Altmire. Welcome, Mr. Mills.
STATEMENT OF JOHN M. MILLS
Mr. Mills. Good morning, Chairman Altmire, Ranking Member
Fallin, and Congressman Shuster. Thank you for the opportunity
to testify on a topic of great importance to the highway and
bridge construction industry: the upcoming highway bill. My
name is Jack Mills. I am the owner and president of Plum
Contracting, located near Delmont in Westmoreland County,
Pennsylvania. I am a resident of Plum Borough in Allegheny
County.
Plum Contracting was incorporated in 1980. We had nine
employees and we did work as a subcontractor installing edge
drains and erosion-control features on roads and highways
throughout Pennsylvania. In 1999 Plum diversified into road and
bridge building. Today we are a prime contractor for projects
up to $10 million and annual revenues around $30 million.
Plum is a member of the Construction Association of Western
Pennsylvania and the Associated General Contractors of America,
on whose behalf I am pleased to represent today. AGC is the
largest and oldest national construction trade association in
the United States, representing more than 33,000 firms engaged
in construction of the Nation's public works infrastructure and
commercial facilities.
Plum Contracting is a small business in the highway and
bridge construction industry. We have built projects that have
had a positive impact on economic opportunities in western
Pennsylvania. We recently completed an 8.5 million project in
New Stanton, PA, and are currently working on a $7.5 million
project in Westmoreland County. We have an office staff of nine
professionals and 40 full-time field employees. Plum
Contracting is a union contractor, and our current weekly
payroll is around 100 employees.
Plum has been affected by the downturn in the highway and
bridge funding. Our revenues and weekly payrolls have decreased
by around 35 percent since 2007. Nationwide, construction
unemployment is still at 17.4, percent compared to the total
unemployment rate of 9.7 percent. The Recovery Act is already
going a long way towards creating and saving these jobs. And in
fact, Plum Contracting is a subcontractor on a Recovery Act job
in Pennsylvania.
Last summer, to address revenues, Plum Contracting expanded
its bridge division and was successful in being the low bidder
on six bridge projects in Pennsylvania. Although we currently
have a backlog, we expect our profit margins to be down this
year due to the increased competition for the work in this
industry. That is why we have a vested interest in the upcoming
highway bill, which we hope will substantially increase Federal
funding for highway and bridge work as well as the immediate
crisis facing the balance of the Highway Trust Fund.
First, let me address the Highway Trust Fund. The U.S.
Department of Transportation and others have found that the
balance of funds will fall below the minimum cash level
necessary to make daily payments by the end of August. When
this happens, the U.S. DOT will be required to drastically slow
down State reimbursements for highway and bridge work. Action
is needed immediately to fix this problem.
The American Association of State Highway and
Transportation Officials estimate that the additional 8 billion
transfer of general funds into the Highway Trust Fund will be
necessary to accomplish this. The fund also needs an additional
10 billion in fiscal year 2010, when the program could face a
35 percent cut in funding.
In the contracting business, contractors typically do the
work and incur the costs and then submit payment requests to
the State. However, in a payment slowdown or stoppage
situation, your payment is delayed, meaning the contractor is
the one who suffers the cash flow crunch. This is exceptionally
problematic for small business contractors who rely more on
timely repayments to stay afloat.
Congress must take the steps immediately to bring short-
and long-term certainty to the program. The construction
industry makes decisions about investments and new equipment
and in retaining and training a workforce based on its best
projection about where the market will be over the long term.
This is particularly true for small businesses which typically
have less operating capital to invest.
To bring long-term certainty to the program, Congress must
also continue work towards enacting a multiyear surface
transportation authorization bill to replace SAFETEA-LU, which
expires on September 30. We ask Congress to reject proposals by
the administration to delay action on the critical legislation
until March 2011. Our transportation challenges will not solve
themselves and will only get worse over the next 18 months.
Congress must enact a bill that establishes a national
vision for a transportation system that meets 21st century
needs. Congress must provide the resources to improve existing
assets to expand system capacity, both transit and highway, and
to reduce congestion and prevent highway facilities.
To fund these national priorities, we urge Congress to
increase the Federal motor fuels tax to recoup lost purchasing
power and index it to inflation, while moving towards a non
fuel-based financing mechanism for the future. We recognize
that a fuels tax increase is a tough political decision, but
this user fee, which has not been increased since 1993, is the
most reliable and efficient method to finance surface
transportation improvements in the short term.
We also recommend that Congress take steps to improve work-
zone safety for construction workers and motorists by calling
for greater use of barriers in highway work zones, despite the
increased costs. Smaller contractors have a hard time bidding
for projects that require these measures because of their costs
and the difficulty including their costs in the overhead.
Mr. Chairman, the United States has been under-investing in
our transportation systems for far too long. The under-
investing is costing U.S. businesses, small and large, and the
traveling public time and money. Congress must address the
immediate short-term shortfall facing the Highway Trust Fund
before it breaks for the August recess, and it must continue
efforts to enact a multiyear bill that increases investment and
provides construction companies with the continuity that allows
them to thrive and contribute to the Nation's economic well-
being. Thank you.
Chairman Altmire. Thank you, Mr. Mills.
[The statement of Mr. Mills is included in the appendix.]
Chairman Altmire. For our next witness, Mr. Kirchhoff's
introduction, I am going to send it over to Congressman
Shuster.
Mr. Shuster. Thank you very much, Mr. Chairman.
Tom, welcome today. Tom Kirchhoff is the Executive Vice
President and Chief Operating Officer of Cleveland Brothers
Equipment in Harrisburg, Pennsylvania. Cleveland Brothers
sells, rents, and services Caterpillar construction equipment
throughout the State of Pennsylvania and, as I mentioned
earlier, most importantly, throughout the Ninth Congressional
District in Pennsylvania.
Mr. Kirchhoff is here to testify on behalf of the
Associated Equipment Distributors. AED members provide
construction equipment and supplies and services in the U.S.
and in Canada.
So again, Tom, welcome.
STATEMENT OF TOM KIRCHHOFF
Mr. Kirchhoff. Good morning, Chairman Altmire, Ranking
Member Fallin, and Congressman Shuster. It is my pleasure to
come before you today both in my capacity as a small business
owner and as a spokesman for my industry, to discuss the ways
in which highway investment affects small companies.
Cleveland Brothers is the authorized Caterpillar
construction distributor for 59 Pennsylvania counties, in an
area that stretches from the northeast corner of the State
throughout all of central and western Pennsylvania, including
Pennsylvania's Fourth Congressional District and the Ninth. Our
territory also includes 17 counties in northern West Virginia
and two in western Maryland. Our family-owned company has 27
locations and 1,050 employees.
I am also testifying on behalf of the Associated Equipment
Distributors, the national trade association representing
authorized independent distributors of construction, mining,
forestry, and agricultural equipment. AED has more than 1,000
members, the overwhelming majority of which are small
businesses. Approximately 48 percent of the Association's
distributor members report revenue of $10 million or less.
I would like to use my time this morning to highlight three
key points. First, America's surface transportation
infrastructure policy is in a state of crisis. Numerous studies
have concluded that our Nation's crumbling highways threaten
our economic vitality and public safety, and the transportation
investment should be increased at all levels of government.
The Texas Transportation Institute reported just last week
that traffic congestion, resulting in large part from
inadequate road capacity, cost the country $87.2 billion per
year in wasted time and fuel. A study released earlier this
month by the Transportation Construction Coalition found that
more than half of all highway fatalities are related to
deficient road connections, and that poor roads are the single-
most lethal contributing factor to motor vehicle crashes.
And the Surface Transportation Revenue and Study
Commission, which was established by Congress to examine the
infrastructure crisis, said last year that the United States
should be investing at least $225 billion annually from all
sources to upgrade our existing surface transportation system.
We are spending less than 40 percent of that amount today.
The current highway reauthorization presents an ideal
opportunity to tackle this crisis. However, at the same time
that Americans are waking up to problems with our highways, the
Highway Trust Fund, the primary vehicle for surface
transportation investment, is on the verge of bankruptcy.
Congress must therefore take immediate action both to shore up
the HTF and to enact a long-term plan to address the Nation's
infrastructure investment shortfall.
My second point is that highway investment has a
significant market impact on the small business-dominated
equipment distribution industry, which is why my colleagues and
I are so attuned to the problems facing the highway program. A
study conducted by George Mason University economist Steven
Fuller last year determined that, on average, 6.4 cents of each
dollar spent on highway construction is spent to buy and lease
new equipment and on major repair and maintenance outlays. Dr.
Fuller also found that every dollar of direct spending for the
purchase of heavy construction equipment generates a total of
$3.19 in economic impact. This represents $1 of direct spending
and $2.19 in indirect and induced economic activity as the
money spent at equipment dealerships like Cleveland Brothers is
re-spent by AED members and their employees in other sectors of
the economy.
Dr. Fuller's research confirms that highway spending at all
levels of government has a major impact on equipment
distributors. It also shows that in addition to the long-term
societal benefits of infrastructure investment, the related
spending on construction equipment and services has significant
economic impact in communities throughout the Nation where AED
members do business and their employees live and work.
My third point is that the uncertainties surrounding the
near-term health of the Highway Trust Fund and the status of
reauthorization are adding to the historic instability in
construction markets and negatively affecting equipment
distributors and their contractor customers.
AED members around the country report market conditions
similar to those that I face in Pennsylvania. Contractors lack
confidence in the long-term demand for their services and are
therefore refraining from purchasing new equipment. As a
result, equipment distributors like Cleveland Brothers have
seen sharp declines in sales. Equipment inventory is piling up
and putting a strain on distributors who must finance the
machines in their yards at a time when credit has tightened
dramatically.
The problems are compounded by the fact that State
governments have been forced to slash their transportation
budgets, and uncertainty about the future of the Federal
program is making it more difficult for State transportation
departments to plan.
AED members are, like other small construction industry
companies, directly affected by the uncertainties facing the
Federal Highway Program. However, AED members are also
affected, along with other businesses and the public at large,
by inadequate infrastructure investment at all levels of
government. In urban areas, our members and their employees
confront traffic congestion which drives up costs of doing
business and wastes precious time and fuel. In rural areas,
inadequate investment means unsafe roads and diminished access
to jobs, customers, and public services.
Mr. Chairman, I see that my time is about to expire, and I
wonder if I might have 1 minute to conclude my remarks.
In conclusion, the United States is confronting an
unparalleled infrastructure crisis which threatens our ability
to compete globally in the 21st century and which threatens the
safety of our citizens. At the same time, the uncertainty
surrounding Federal infrastructure programs is contributing to
historic volatility in equipment markets and compounding the
challenges facing the construction industry at large.
Congress can address these two issues simultaneously by
quickly resolving the near-term solvency of the Highway Trust
Fund and by enacting a long-term highway reauthorization bill
that dramatically increases highway capacities and creates new
revenue streams to support infrastructure investment.
We look forward to working with the members of this
Subcommittee and with all your House and Senate colleagues in a
bipartisan manner to achieve these goals. Thank you again for
the opportunity to participate in this hearing, and I look
forward to answering any questions you may have.
Chairman Altmire. Thank you.
[The statement of Mr. Kirchhoff is included in the
appendix.]
Chairman Altmire. We will turn now to Mr. Rob Robinson. Mr.
Robinson is Chairman of Urban Design Associates based in
Pittsburgh, Pennsylvania. His firm offers is urban design and
architectural services. Mr. Robinson is here to testify on
behalf of the American Institute of Architects. Founded in
1857, the AIA is the leading professional membership
association for licensed architects. Welcome, Mr. Robinson.
STATEMENT OF ROB ROBINSON
Mr. Robinson. Thank you very much, Chairman Altmire,
Ranking Member Fallin, and Congressman Shuster. I appreciate
the opportunity to appear before you to discuss the
transportation policy and its impact on small businesses.
At Urban Design Associates--and we were founded in 1964--we
have spent our lives designing cities, towns, and neighborhoods
as vibrant places for people to live, work, and play. Through
our projects, we see how transportation systems connect people
to jobs, connect people to opportunities, and to each other to
create liveable, sustainable, and prosperous places.
I am also pleased to represent the American Institute of
Architects, because the AIA is comprised of more than 83,000
licensed architects, architects in training, and allied
professionals who are committed to the planning and design of
safe and sustainable buildings and communities. Today,
thousands of AIA architects are involved in designing
transportation systems, transit facilities, roadway amenities,
and master plans that don't just foster mobility and access but
also create sustainable, smart communities. Many of those
architects work for small firms like my own and many are sole
practitioners.
In fact, 96 percent of U.S. architecture firms have 50 or
fewer employees, and those firms account for nearly six in ten
of the workers who are employed by architectural companies
nationwide.
It is small-design firms like ours that drive prosperity in
our communities. We are in multiple places, almost always
locally, working for communities we know well. However, the
current economic crisis has devastated much of the architecture
profession. There is no secret about that. Every architect I
know has seen layoffs and cutbacks in his or her firms. Smaller
firms are particularly harder hit.
The challenges our Nation faces are not just confined to
the economy. The fragile state of infrastructure in many of our
communities is challenging our ability to recover and prosper.
This is why we think it is vital for Congress to pass the
comprehensive legislation this year rather than waiting for
some in the future.
The Surface Transportation Authorization Act couldn't come
at a better time. It recognizes what we know as architects so
well: that well-planned and -designed transportation projects
create prosperous, sustainable, and liveable communities. This
legislation will rebuild our infrastructure, it will reduce
congestion and lower greenhouse gas emissions. Most
importantly, it will create jobs; jobs for architects and
planners, engineers, builders, operators, maintenance
personnel, suppliers. It is a huge and interrelated network
dependent on the transportation improvements.
At a time when unemployment is nearing 10 percent, it makes
no sense for us to delay legislation that will create so many
well-paying jobs across many spectrums of the economy. The
impact of the bill on job creation is not limited to direct
employment either. Its benefits to the small business community
will be significant.
First, well-designed transportation projects create
attractive and accessible business districts where small
businesses can flourish. And this is particularly true in older
historic Main Streets and central business districts. And in
Pennsylvania we have got many of those conditions all linked
together to make for a stronger regional economy.
Second, a 21st century transportation system will help
people live near where they work, and that will grow the talent
pool for small businesses and reduce dependency on fossil fuels
and long commutes.
Third, a 21st century transportation system will reduce
congestion, pollution, and improve the safety and reliability
of the transportation network. As you mentioned earlier, every
minute stuck in traffic, every axle damaged by potholes, is
money off the bottom line. Small businesses with thinner profit
margins and tighter cash flows can't really depend on an
unreliable transportation system.
For those reasons, we think that Congress simply cannot
wait another 18 months or longer to pass a transportation bill.
It must act now.
In my written statement to you, I have made recommendations
to ensure the bill will help small architecture firms plan and
design transportation that will strengthen our country, and I
will summarize those briefly.
The legislation should provide ample opportunities for
small businesses to take part in the design and construction of
new transportation infrastructure, including the design of
transit and intermodal facilities which has really a direct
impact on multipliers within towns and cities. The legislation
should ensure that small firms have a chance to compete for and
win contracts. And the legislation should preserve provisions
in current law that require funds to be awarded to architecture
and engineering firms through qualifications-based selection.
QBS ensures that architects and engineers who design public
projects are the most qualified to do the work.
We appreciate the opportunity to provide testimony on this
important issue, and I am happy to answer any questions after
the testimony here. Thanks.
Chairman Altmire. Thank you, Mr. Robinson.
[The statement of Mr. Robinson is included in the
appendix.]
Chairman Altmire. We now move to Mr. Rod Martin. Mr. Martin
is the Vice President of Martin Stone Quarries, Inc., in
Bechtelsville, Pennsylvania. Martin Stone Quarries has been
serving southeastern Pennsylvania and surrounding States with
stone and gravel since 1953. Mr. Martin is here to testify on
behalf of the National Stone, Sand, and Gravel Association
which represents the crushed stone, sand, and gravel industries
in the U.S. Welcome, Mr. Martin.
STATEMENT OF ROD MARTIN
Mr. Martin. Thank you, Chairman Altmire, Ranking Member
Fallin, and Congressman Shuster for inviting me to testify
today on behalf of the National Stone, Sand, and Gravel
Association on the importance of the reauthorization of our
Nation's surface transportation law to the aggregates industry,
particularly its small business members.
The National Stone, Sand, and Gravel Association represents
the crushed stone, sand, and gravel or construction aggregates
industry. Its member companies produce more than 90 percent of
crushed stone and 70 percent of the sand and gravel consumed
annually in the United States. There are more than 10,000
aggregate operations nationwide, and almost every congressional
district is home to a crushed stone, sand, or gravel operation.
Proximity to market is critical to high transportation
costs, so 70 percent of our Nation's counties include an
aggregate operation. Of particular relevance, 70 percent of the
NSSGA's members are considered small businesses.
As you said, Martin Stone Quarries was founded in 1953 by
my grandfather, Henry Martin. We operate two granite quarries
in Bechtelsville, Pennsylvania, and people have actually
quarried at our one site since the late 1800s. Right now, I run
the business with two other third-generation owners, and we
currently employ 58 people, which is down 20 percent from 2006
levels.
In addition to providing quality materials and services to
our customers, we are committed to being a responsible
corporate member of our surrounding community. Our time,
materials, and financial resources have been routinely donated
to the construction and restoration of local parks, recreation
areas, and churches. Educational field trips are offered to any
interested school districts to inform the local students about
the unique nature of the mining industry. We have also opened
our gates to local fire companies, allowing them to perform
mock rescue drills inside the quarry.
Nearly two-thirds of the nonfuel minerals mined each year
in the United States are aggregates. Construction aggregates
are used primarily in asphalt and concrete; 94 percent of
asphalt pavement is aggregate and 80 percent of concrete is
aggregate, and every mile of interstate contains 38,000 tons of
aggregate.
The business of successfully building and maintaining our
national surface transportation infrastructure depends in large
measure on funding stability and year-over-year predictability
provided by the Surface Transportation Act. The current law,
SAFETEA-LU, does expire on September 30, and it is imperative
that Congress act to reauthorize the law now or lose many of
the benefits of the economic stimulus package that are just
beginning to be felt by the construction sector.
Reauthorization is critical to NSSGA's many small aggregate
producers. Sixty percent of our business comes directly from
road construction and sales to asphalt plants, concrete plants,
and other highway contractors. We are no different than the
majority of the small business producers in the NSSGA.
Multiyear reauthorization provides an important continuity that
my company, our employees, and our customers rely on in order
to meet significant needs of the local, State, and Federal
transportation systems.
In the absence of a long-term plan, our customers are
telling me that they are not sure what the next years are going
to bring them; therefore, causing me to withhold investing in
plants and new machinery for the foreseeable future.
It is also increasingly difficult for us to do workforce
planning due to the uncertain demand. We are looking at
possibly another round of layoffs that will take our workforce
down again if there is no improvement in marketing conditions
and Congress fails to pass a multiyear reauthorization plan.
I would like to thank you for allowing me to testify today
on the importance of this action on a multiyear surface
transportation bill. Martin Stone and the members of the
National Stone, Sand, and Gravel Association look forward to
working with Congress in developing a reauthorization bill that
will spur economic revitalization by creating jobs, as small
businesses generate 60 to 80 percent, while simultaneously
building the surface transportation network of the 21st
century.
Thank you again for allowing me to testify today, and I
will be happy to take any questions later.
Chairman Altmire. Thank you, Mr. Martin.
[The information is included in the appendix.]
Chairman Altmire. And for the introduction of our final two
witnesses, I will turn it over to Ranking Member Fallin.
Ms. Fallin. Thank you, Mr. Chairman. I would like to
introduce Mr. Henry Ross from Elmira, New York. Mr. Ross is
chairman of the board of the American Traffic Safety Services
Association, and employed by the USA-SIGN, a small sign
manufacturing company, where he serves as director of sales and
marketing. And we want to thank you for coming to Washington,
D.C. to help us with this Committee hearing. Mr. Ross.
STATEMENT OF HENRY A. ROSS
Mr. Ross. Thank you, Congresswoman Fallin. Mr. Chairman and
Congressman Shuster, thank you for being here. Thank you all
very much for giving me the opportunity today to discuss the
transportation authorization and its effects on small
businesses and on the Nation as a whole.
As the Ranking Member said, my name is Henry Ross. I am
chairman of the board of directors of American Traffic Safety
Services Association, and I am employed by USA-SIGN, a traffic
sign manufacturing company in Elmira, New York.
American Traffic Safety Services Association, an
international trade association, is located in Fredericksburg,
Virginia. And since 1969 it has represented companies and
individuals in the traffic control and roadway safety industry.
Over 1,600 ATSSA members provide the majority of features,
services, and devices used to make our Nation's roadways safer.
These include pavement markings, road signs, work-zone traffic
control devices, guard rail, and other safety features.
Many of ATSSA's members who focus on roadway safety
infrastructure are small business owners. For example,
temporary traffic control operations are more often than not
performed by small businesses that act as subcontractors in
work zones.
Late last month, House Transportation and Infrastructure
Chairman James Oberstar and Ranking Member John Mica introduced
the Surface Transportation Authorization Act of 2009, a 775-
page draft, for a new, comprehensive, 6-year transportation
bill. This draft truly highlights the Nation's needs for
increased roadway safety.
Last year, a little more than 37,000 men, women, and
children perished on America's roadways. ATSSA, through its
Toward Zero Deaths Vision Plan, is committed to reducing these
tragically high numbers through a targeted investment in
roadway safety infrastructure. The House Transportation and
Infrastructure Committee's bill is committed to reducing these
deaths through new performance measures, and ATSSA commends
them for that.
One concern of our members is timely payment. Small
businesses rely on timely payment due to limited cash flow.
While subcontractors are often first on and last off the work
site, they may be the last to be paid. These small businesses
rely on projects created through the transportation
authorization to keep their businesses running, to hire and
maintain existing employees, and to buy new equipment.
For example, one of our California members who owns a
pavement marking company mentioned his frustration to ATSSA
staff just yesterday regarding timely payment to
subcontractors.
California prompt pay statutes require all payments to be
made to subcontractors within ten days. The reality is that
sometimes the payments don't get doled out for 30 days.
Sometimes it is over 6 months. Even public agencies have been
known not to pay within the 10-day required period.
ATSSA would like to recommend that the Committee consider
directing the Secretary of Transportation to undertake a study
of payment practices to small businesses that are receiving
funds for Federal aid highway projects, and report back to
Congress their findings on these payment practices within a
year of passage of the transportation authorization. It is
unfair for small businesses to struggle to stay afloat due to
delayed payments. The results from such a study could be
utilized as a basis for further action.
There truly is a ripple effect throughout the construction
industry with each new authorization bill that is enacted.
Unfortunately, without a timely new transportation
authorization focused on expanding investment in our Nation's
transportation safety infrastructure, these small businesses
will indeed suffer.
Many argue that the recent passage of the American Recovery
and Reinvestment Act, that with the passage of that there is no
need for a reauthorized transportation bill. In our opinion,
this is exactly the right time to continue to invest in our
Nation's transportation infrastructure. These small businesses
are beginning to feel the positive effects of the stimulus
package and have started to rehire previously laid off
employees. To halt any forward momentum at this time would be
devastating. If the transportation authorization is delayed
past the September 30 expiration of SAFETEA-LU, then many of
these small businesses will have to begin to cut back on
employees, new hires, equipment, and material purchases.
Federal highway programs authorized under the
transportation authorization account for 40 to 45 percent of
the total roadway dollars spent annually in the United States.
In addition, many of the contracts that our member companies
work on stem from the Highway Safety Improvement Program, HSIP.
ATSSA continues to advocate that these HSIP funds not be
transferrable out of HSIP to other programs. According to the
Federal Highway Administration, seven States have transferred
their dollars out of their HSIP funds. With these transfers,
funding flows away from the safety-specific subcontractors and
our small businesses that work on these vital safety projects
and save lives. There should be an end to transferring
infrastructure safety dollars out of HSIP due to the continuing
death toll on our Nation's highways.
Chairman Altmire, Ranking Member Fallin, Congressman
Shuster, there is great urgency and anxiety throughout our
member companies, especially within those which are small
businesses that rely on the authorization projects to continue
their day-to-day operations and their prosperity.
America truly is the land of opportunity. ATSSA's small
business members bring needed services, safety devices, and
jobs to communities throughout the country. Many of us can
agree that the United States is still facing troubling economic
times.
Let's all work together, small businesses, local, State,
and Federal governments, the hardworking men and women, to
better our roads and make them safer, boost our economy, and,
most importantly, save lives on our roadways. ATSSA's small
business member companies are eager, willing, and capable, and
with an authorized transportation bill we can all work together
over the next 6 years to do just that. There is no time for a
12-month, or an 18-month extension, for that matter. Our small
businesses across the country can't afford this kind of delay.
Thank you very much for the opportunity to testify, and I
will take your questions. Thank you.
Chairman Altmire. Thank you, Mr. Ross.
[The statement of Mr. Ross is included in the appendix.]
Chairman Altmire. For our final witness, to introduce Mr.
Filipczak, I will turn it over to Ranking Member Fallin.
Ms. Fallin. Thank you, Mr. Chairman. We are pleased today
to have Michael Filipczak from Elkridge, Maryland. Mr.
Filipczak is the president of a company called Midasco, which
is a specialty infrastructure contractor. And we appreciate you
coming today to talk about our infrastructure problems.
STATEMENT OF MICHAEL FILIPCZAK
Mr. Filipczak. Chairman Altmire, Ranking Member Fallin, and
Congressman Shuster, thank you very much. My name is Michael
Filipczak, and I am the president of Midasco LLC, a specialty
infrastructure contractor based in Elkridge, Maryland. It is my
pleasure to appear today on behalf of the American Road and
Transportation Builders Association.
ARTBA represents the transportation construction industry
that builds and preserves the Nation's roads, bridges, transit
systems, airports, railroads, and waterports.
Midasco is a signing, lighting, traffic signal, tolling and
intelligent transportation system contractor. We perform both
construction and maintenance services, and work both as a prime
contractor for various State agencies and as a subcontractor to
other contractors primarily on interchange and major bridge
projects. We employ about 140 people and operate primarily in
Maryland, Virginia, and North Carolina.
According to the latest economic census conducted by the
U.S. Bureau of the Census, there are just over 11,000 business
establishments involved in transportation construction. Most of
these are small businesses. More than 90 percent have less than
100 employees, and the average has about 40 employees. So my
industry is largely comprised of small businesses, and the
improvements we deliver are very important to an even broader
range of smaller firms throughout our economy.
Small businesses depend on the Nation's transportation
network to move people and products around town and throughout
the country. Highway congestion has become a major drain on the
energy and vitality of American small businesses. It negatively
affects small businesses in three significant ways:
First, when employees are paid by the hour, time lost
waiting in traffic or waiting for a delivery means higher
costs.
Second, when businesses are paid by the job, by the trip,
or by the call, traffic congestion that reduces the number per
day means lower income for the businesses.
Third, and most importantly, when the day is spent dealing
with the fallout of highway congestion, scheduling, routing,
late deliveries, missed appointments, or unhappy customers,
this takes time away from planning and growing the business.
The reauthorization of the Federal highway and public
transportation programs has the potential to be a major benefit
to small businesses. Unfortunately, virtually every State is
facing budget shortfalls. According to the National Governors
Association, 15 States have cut transportation investment in
2009, and 19 States will make similar reductions in 2010.
At the same time, revenues flowing into the Federal Highway
Trust Fund will fall short of meeting fiscal year 2009 highway
investment commitments and not be able to support current
levels of spending beyond this year.
The only bright spot is the transportation investment from
the American Recovery and Reinvestment Act. Due to State budget
challenges, however, in many cases and many areas, the stimulus
funds are simply enabling States to maintain current
activities. It is this confluence of challenges that makes the
current push by some to delay the reauthorization until march
of 2011 so mind-boggling. We learned the hard way from 2001 to
2005 that uncertainty at the Federal level at a time of
economic and State budget difficulty leads to a stagnated
national effort to deliver surface transportation improvements.
Beyond the economic cost of our current system, we are
paying too great a price in safety. Our recent study by the
Pacific Institute for Research and Evaluation revealed that
deficiencies in the Nation's roadway environment contributed to
more than 22,000 fatalities and cost the Nation more than $217
billion annually. My company specializes in safety
improvements, and I agree with the report's conclusion that
making the roadway environment more protective and forgiving is
essential to reducing highway fatalities and costs.
Mr. Chairman, the Nation's transportation's challenges will
not solve themselves, and postponing the reauthorization is not
going to make the difficult decisions associated with that bill
any easier. Absent major initiatives by all levels of
government and the private sector, traffic congestion will get
worse, physical conditions will deteriorate, and U.S.
competitiveness in the global marketplace will be further
impaired.
The House Transportation and Infrastructure Committee has
produced a robust and comprehensive reauthorization bill. The
bill represents an excellent beginning of the reauthorization
process and should be a call to action for all Members of
Congress. We urge you to push for action on a multiyear
reauthorization bill to address the transportation needs of our
Nation and its small businesses.
Thank you for allowing me to speak before you today, and I
would be happy to respond to any questions.
Chairman Altmire. Thank you.
[The statement of Mr. Filipczak is included in the
appendix.]
Chairman Altmire. And thank you to all the witnesses. We
realize that you have each taken a day or two off of your work
from your business and the impact that that has. You traveled
here at your own expense, and we really appreciate the effort
that you put into being here today. It is helping us greatly as
we work through this very important issue of whether or not to
delay the highway bill, as we are talking about, which none of
us support. And it helps us to have a face with this issue,
with each one of you and your businesses, and how it is going
to directly impact. So thanks to each one of you.
We are going to do two rounds of questions. Each of us,
including myself, will have 5 minutes each, and then we will go
through twice, just for planning purposes.
I am going to open it with Mr. Mills. In many respects it
is advantageous for the government to contract with the smaller
firms. Small local businesses can get to work quickly, they can
access the labor market, and are often more innovative. What
advantages do you feel that small business contractors offer
the government?
Mr. Mills. First off, one is that we are a little bit more
competitive. We have smaller overhead than the large
corporations. If there is a change in the type of work that the
DOTs are letting, we can make the change overnight where the
larger corporations aren't able to do that.
Chairman Altmire. Thank you.
For Mr. Ross, deteriorating road conditions are a
significant cause of motor vehicle accidents, as you pointed
out. So in the context of what we try to accomplish with the
highway bill--which many people think is rebuilding our roads
and bridges, crumbling infrastructure, which is critically
important, certainly in Pennsylvania and around the country--
but what are the key steps the Congress can take in the highway
bill specifically to improve road safety?
Mr. Ross. Mr. Chairman, thank you for that question. As you
may know, ATSSA has put forward a Toward Zero Deaths, what we
call a reauthorization or an authorization policy.
There are significant initiatives laid out in there. One of
them is to increase funding for high-risk rural roads. An
inordinate percentage of the highway deaths that occur, occur
on rural roads, and yet the investment in low-cost safety
solutions can be increased dramatically and can affect those
fatalities.
One of the emerging issues also is the specific funding of
older-driver programs. The SAFETEA-LU provided for the program
but didn't fund it. And we need to recognize that a greater and
greater portion of the driving public is getting a little bit
older and have needs that maybe go beyond some of the features
that we are currently providing, such as sign size, the ability
to see the signs as far as fonts and letter size and reflective
materials and things of that sort. So those are just two right
off the top of my head.
Chairman Altmire. Thank you.
Mr. Robinson, the American Institute of Architects' Moving
Communities Forward study found that investing in
transportation upgrades creates increased commercial activity.
Can you elaborate from your testimony on the nature of the
study, and what were the key driving factors in boosting this
type of business activity?
Mr. Robinson. Well, there are a number of things that are
happening, both when that study was authored and continuing
today, particularly with the investment in multimodal transit
in urban regions, both in cities and in sort of the first-year
suburbs.
When you invest in the sort of multimodal platform for
bringing buses, light rail, transit, bike, and walking
together, it is all of the DNA you need to build a great
integrated community that has amenities, has multiple uses, has
synergy there where people are attracted to live and work. We
are in that phase in this country where there is an enormous
move back to urban mixed-use surface. I mean, the Gen Y-ers
coming out of school where the opportunities are, it is a huge
magnet.
When you invest in the transportation infrastructure that
hooks, connects people to jobs, as you can see in this region
particularly, it is like a lightening rod for private sector
investment around that. And I think it makes it easier on the
funding side, because then you really do get private--we find
you get a lot of private activity to complement the public
investment. So that is a continuing theme. We see it all across
the country in relatively a large variety of scales, from sort
of small towns to large cities.
Chairman Altmire. Thank you.
I will now conclude and recognize Ranking Member Fallin.
Ms. Fallin. Thank you, Mr. Chairman. And we appreciate all
of you coming today, once again. And I appreciate your comments
about not delaying the highway reauthorization bill and what an
effect it would have upon your businesses and small businesses
if we did wait 18 months. And, as the Chairman said, we are not
for that. We want to get on with our planning and our highway
reauthorization bill. We know how important it is to our
infrastructure and safety, and, of course, the jobs.
I have a question. I guess it is something we debate here
in Congress quite a bit. With the stimulus package that was
passed recently, a portion of that money went to highway
infrastructure, not as much as what I would have liked to have
seen. It was a very small portion of that bill. But we are
always debating here in Congress whether that has created jobs
or whether it has sustained jobs within your businesses.
So I would just like to ask each of you, with the stimulus
package that was passed and the portion that went to highway
infrastructure, have you been able to actually create new jobs
or are you just sustaining the jobs that you had? Because some
of you mentioned having to make layoffs with the economy.
Mr. Mills, I will start with you.
Mr. Mills. Thank you for that question. In my particular
business, we have one small subcontract where it is stimulus
money. The other projects that are out for bid in Pennsylvania
are smaller projects that I could do with a decreased
workforce, and I would not replace or buy new equipment or
lease new equipment to do the work on that. So what I have seen
in the amount of jobs that are available to me, the stimulus
package hasn't helped very much at all.
Mr. Kirchhoff. Likewise, we have seen very little benefit.
There has been some small paving work out there and some small
bridge work, which I think has kept some idle equipment busy.
It has not led to any increased acquisition of products from
companies like Cleveland Brothers.
A larger highway construction project would solve that
issue, but the stimulus bill to this date has done nothing to
allow Cleveland Brothers to remain fully employed. As a matter
of fact we, 18 months ago, employed about 1,500 people; we are
now down to a little over 1,000. So, steep declines.
Mr. Robinson. I think for us in the architecture profession
this is a little early to really evaluate how that is
affecting, because it does--even though you say "shovel ready"
and "things are ready," it takes a while. And we recognize
that. But on our clients' side and the constituents', I think
it is very early. You might be sustaining jobs, but we don't
see any evidence on our client side of job creation yet.
Mr. Martin. The same goes for our company. We haven't been
able to create any new jobs with the stimulus package. There
are a few stimulus projects in our area that are funded by the
stimulus package, but they were getting ready to begin anytime
soon anyway. So whether the dollars are actually from the
stimulus, the signs are up there, but there haven't been any
jobs created on our side because of the stimulus project.
Mr. Ross. Anecdotally, we are hearing of some people who
are hiring people back. I don't know that they are going to
hire levels that they were, say, a year ago or a year and a
half ago. We are also hearing, as was said I think earlier,
that some of the stimulus money projects are just sort of
replacing State programs. Some of the States are in such
disarray funding-wise that, except for the stimulus money, I
don't know that they would have a program at all. So it is just
basically treading water and trying to keep your nose up above
a certain level in certain areas, in certain geographic areas.
So the stimulus money is helping that. But if not for that,
it would be even a worse situation. But I wouldn't say that
anybody is really doing well.
Mr. Filipczak. Thank you, Ranking Member Fallin. It is
really a great question that you ask, because we have not seen
any job creation through the stimulus jobs. We have seen,
really, a tremendous amount of bidding activity primarily in
what we would consider maintenance, contracts for lighting or
signals, or signing, which tend to be task order-based
contracts.
The downside of the bidding activity, though, is that there
really has been sort of a feeding frenzy at the bid table as
contractors sort of race to put this work into their backlogs,
because they are not sure what is going to come beyond the
stimulus money and the stimulus jobs without the
reauthorization. And so it really has created a bit of a
situation for us in that way. But in terms of job creation, we
have not seen it.
Ms. Fallin. Thank you, gentlemen. That is all really
helpful.
My other question was because I am very pro-small business,
so I want you guys to be able to create jobs and opportunity
and have investment. But we have been talking about a lot of
policy changes here in Congress, and of course you all
mentioned about support of raising gasoline taxes to fund the
next highway reauthorization bill. But on top of that, if that
is done here in Congress, we also have a new piece of
legislation going through called cap-and-trade which could
raise your costs as small businesses, especially your utility
costs, your fuel costs. And then we, of course, are debating
health care which can also raise your costs.
So I guess my question is: As small business people, you
are talking about possibly raising gasoline taxes to help fund
the next highway reauthorization bill. And I am not sure what
the right answer is on that yet. But if your health care costs
should possibly go up and then cap-and-trade raises your
utility costs and fuel costs, can you all sustain those cost
increases to your business and will you still be competitive?
Anybody? Mr. Mills.
Mr. Mills. I think that if it is across the board, as far
as being competitive, and all the contractors would be on the
same level playing field, I think that that is okay.
As far as the increased costs, ultimately it will be passed
on to the owner, which would be in my case--consumer, which
would be Pennsylvania, which would also be the taxpayers of
Pennsylvania. I think for the amount of jobs that we create and
the amount of families that we feed, I think it is well worth
it.
Mr. Kirchhoff. Likewise, we refer to it as a user fee at
our company versus a gas tax. And I think the benefits of it--
decreased congestion, safer roads in the rural part of our
territories and so forth--far outweigh the increased expense
that our company would incur.
And as to the other topics of health care and cap-and-
trade, I think we would be in a position with our current
expense levels and so forth to be able to withstand--the little
bit I am understanding of the new bill--be able to withstand
that with our current levels of funding for that business.
Ms. Fallin. That is interesting. Even though you have gone
from 1,500 to 1,000 employees, you could withstand those cost
increases?
Mr. Kirchhoff. I would have to see what the final cost
increases are. But I think--we invest heavily in our people. We
have a very robust health care plan for our people. And I think
anything that we are being obligated to do, we are already
doing. So I am confident that we can handle that.
Ms. Fallin. Okay.
Mr. Robinson. I think it is always an interesting argument
when you pose it as an increase in costs and operations, as if
the way we are headed is not ultimately taking us to a much
more expensive end gain. So this idea that you take this slice
and it is going to cost you more for all of these things, yes.
But isn't it really costing us a lot more for not doing this in
the long run? I mean, every one of these are issues that have
been piling up. So we are at that moment in history where we
are trying to take care of a lot of stuff, and it happens to be
all at once.
I think small businesses are exactly--as has been said, we
are able to respond to those, and we will survive and we will
achieve and we will prosper. As long as it is all headed to
reinvestment and recapitalizing this country, I think we are in
good shape.
Mr. Martin. We look at it the same way as Tom said, as a
user fee. I mean, if you are going to use the road, you might
as well pay the fee to use the road. And an increase in the
user fee will give us more transportation work, which will give
our company more work, which in turn will help us pay for the
additional costs of the health care and the cap-and-trade. So
we strongly are in favor of a user fee increase.
Mr. Ross. Our Association agrees. We in our Toward Zero
Deaths proposal actually have addressed an increase in the user
fee. And I think we also have to look at it as a true
investment, and the payoff is in creating jobs and saving
lives. And we can get into all sorts of subsets of that, but
that is the way we approach things.
Mr. Filipczak. We are in favor of increasing the gas tax
and in fact indexing that to inflation. And just from a company
perspective, we look at it really two ways. You know, we pay
now or we pay later. If we pay more in gas tax and we increase
our internal fuel costs, that is a cost that I think we can
absorb. But we are not just building those systems, we are also
using those systems. We dispatch 35 crews every day, and they
have got to get to the job site on time to respond to our
customers.
And so if we don't make the investment, then we are not
going to be able to do the job that we have been contracted to
do. So we are in favor of that.
Ms. Fallin. Thank you, Mr. Chairman.
Chairman Altmire. Mr. Shuster.
Mr. Shuster. Thank you very much.
Just to follow up on the line of questioning of my
colleague from Oklahoma, and I would assume all of you are
going to support an increase in the user fee at the pump. It
makes sense. That is where the money is. And if you use it, you
pay for it. I look out there, and everybody but probably Mr.
Robinson are heavy users of the highways with trucks and
vehicles, so you all see that increase go up, but you see the
benefit to that.
As far as the increase in possibly health care costs, my
question is a little different. One of the proposals is if you
don't provide health care to your employees, it is an 8 percent
penalty to you. And probably many of you in your head know what
you have in health care costs versus what your payroll is. And
if you do the math, I had a company that came to me yesterday,
a small company that employs about 50 people, $128,000 a year
is what they pay in health care costs. Their payroll is about
$900,000. So he told me he would rather pay the $72,000 and
saving $50,000 a year. And I have got to believe your ratios
are about the same for all of you; health cares costs are one-
tenth or one-seventh, or something like that, of your payroll.
Would that be the same outcome for you if you had that type
of--could you respond to that and be thinking about that?
Yes, Mr. Ross.
Mr. Ross. Congressman, we have to remember we are in a
competitive environment for the people that we have working
with us and for us. We have to go out and recruit, we have to
train. We are making an investment in them every day. Part of
that investment are the benefits that we provide. If we take
away some of those benefits, we could very well lose good,
trained people, and not get them back.
Mr. Shuster. I am not saying taken away from you, I am
saying the government can supply you with that insurance and
save you, in this case scenario, $50,000 a year. So I am just
saying, on a business model, if you are paying $200,000 in
health care costs, and you are paying $2 million in wages, an 8
percent penalty on that, it would seem to me you would make the
decision to let the health insurance go to a government-
supplied entity instead of paying out of your pocket if there
is a savings there. I am not saying take it away, I am saying
just a different source--as a business person
Mr. Ross. Looking at absolute numbers, maybe there is an
argument there, or maybe there is a substantiation for that
other position. I think that you have to--certainly from a
business standpoint, you have to look at what are the products
you are talking about, and what your employees expect, what do
you want to provide? I mean, we pay lots of things every day
that we don't want to pay, and I am not just talking about
employee benefits, I am talking about lots of stuff.
Mr. Shuster. I was a small business owner, and the case you
are making to me is you will pay more for the same piece of
equipment if you can get the same piece of equipment for less?
Thomas, you are shaking your head.
Mr. Kirchhoff. Yes. Going back to the logic and how you
posed the question, when I do the quick math in my head, the 8
percent is an easy decision for us. I think we invest far more
in our people, and their health plan is far more robust than 8
percent of our expense.
So not knowing too much about the legislation and so forth,
running the quick math in my head, I would certainly think that
could be a direction we would go.
Mr. Shuster. We are all waiting to see what the legislation
looks like.
I will yield to my colleague.
Ms. Fallin. Yes, if you will yield for just a moment.
I guess the question he is trying to ask--because we have
been debating this here in Congress, too--would you drop your
private-sector coverage if you could just pay an 8 percent
increase than what you are paying right now with the
government?
Mr. Kirchhoff. If it could provide the same level or better
benefits for our employees, sure we would consider it, if it is
the same level of benefits.
Mr. Shuster. It takes someone from Oklahoma to make sense
of what I was trying to say.
Mr. Kirchhoff. I guess the answer is yes.
Mr. Shuster. And the other question I had--and I didn't
mean to get off on the health care tangent, but it is the issue
of the day. But also, just to talk a little bit--I just have 30
seconds--but the competition that is out there, and I see it in
my area where people are coming from all over, large companies
are competing. How is the competitive environment out there
right now for you? Like I said, especially with--I know most of
you are smaller companies, but the big boys sort of coming in--
Mr. Filipczak. I can answer from our perspective, it has
been extremely fierce. And it has gotten more competitive with
the stimulus dollars out there. And in my mind, it is really
the stimulus dollars flowing now, but linked with the
uncertainty of the long-term funding that is causing a more
competitive than normal environment.
Mr. Shuster. Anyone else want to take a crack at that?
Mr. Martin. From our perspective, it is definitely much
more competitive. We sell directly to the highway contractor,
the asphalt plants, so when they get a bid opening, there are
50 people there where there are usually 5 or 10. So they have
got to sharpen their pencils and get real tight on their
numbers. Their margins are shrinking, so therefore they are
starting to hammer us to start shrinking our margins. And now
is not the time to be shrinking the margins with all of our
other costs that we are talking about possibly going through
the roof.
Mr. Shuster. If I could just ask one more question, Mr.
Chairman, and I will forgo my second round.
I think some of you touched on it, but could you be a
little more specific? What kind of things--we are talking about
the highway bill and doing an 18-month extension. How much of
an impact is that going to have on your short-term and long-
term planning if you have an 18-month versus you have a 6-year
bill?
I see, Mr. Ross, you put your finger up first.
Mr. Ross. The thing that concerns me about a 12- or 18-
month extension is the fact that you don't have any
predictability. Small businesses need to be able to justify
investments in people and in equipment, and you can't do that
if you don't know what the funding is a year out or 2 years
out.
That is what has been nice about having a 6-year bill--
although SAFETEA-LU was actually a 4-year bill. You just can't
do it. And that is why this whole issue of those of us who are
dependent on State programs as well, and we see what has
happened with the State programs, and then the normal SAFETEA-
LU type of situation, their inability possibly to make their
match, it throws all that into question. You are going to get
everybody real nervous if we just do extensions the way we did
on the last reauthorization, and people are not going to be
making the long-term investment in equipment and in people.
Mr. Shuster. And I am going to ask you, Tom, because I know
we had a discussion about this, what is more difficult, the
capital or the people, in trying to figure out which to do,
what you are going to do?
Mr. Kirchhoff. In regard to our investment in our business?
Mr. Shuster. Right. In 18 months versus 6 years?
Mr. Kirchhoff. Well, as you have seen, I have talked to
probably 10 to 20 large contractors of ours in the last week or
2 preparing for this statement, and they have all mentioned to
me their uncertainty about the future is refraining and
restraining them from making any kind of a large capital
outlay. They are spending some parts and service revenue to
keep their equipment going, and they are keeping their idle
equipment busy, but that is not moving the needle for our
Cleveland Brothers. We are significantly impacted by that, and
extending out another 18 months will just further the pain that
we have been talking about here all day today.
I think at September 30, we recognize some sort of an
extension is going to be necessary. I would like to hope it is
going to be far less than 18 months, maybe the order of 6
months, again, to put an end to that uncertainty. Our
contractors just know that there is--something is coming, and
when I buy this piece of equipment from you, Cleveland
Brothers, I will have work for it for the next 6 years--or
there is opportunity for work for the next 6 years. And right
now they don't have any of that confidence.
Mr. Shuster. Thank you very much.
Thank you, Mr. Chairman.
Chairman Altmire. Just one or two more.
Mr. Robinson, the Brooks Act, also known as qualifications-
based selection, ensures that architects who design public
buildings are the most qualified to perform the work.
How does QBS ensure the highest quality of work and result
in a leveling of the playing field for small businesses?
Mr. Robinson. What happens with QBS is that you are not
competing directly on price anymore. And what typically happens
is that you will get large national and multinational firms
that bring all their disciplines under one house, so they
become huge competitors to take these projects. And they are
not necessarily built for that particular expertise, it is
included in a whole basket of services.
So it really allows you to pull out where you have very
specific expertise and experience and let that become kind of
building a team to do these projects rather than just taking it
as a full one big shop. And we have seen a lot of that
happening over the last few years as consolidation into giant
firms who go out--and we talk about competition--are competing
for everything under the sun. So it really knocks the small
business--it sort of knocks them out of a competitive platform
to be able to do that both on price and capacity.
Chairman Altmire. Thank you.
And my final question, I think, will transition nicely into
Congresswoman Fallin's final question.
Specifically for Mr. Martin, without a multiyear highway
reauthorization, States are unlikely to initiate large transit
projects, and contract awards for construction projects will
inevitably slow.
Can you discuss the percentage that your business revenues
rely on transportation construction dollars, and have you seen
this reduced due to the lack of a multiyear highway bill to
this point?
Mr. Martin. Yes, great question. Roughly 60 percent of our
business is directly related to transportation spending, either
building the roads, the asphalt for the roads, the concrete for
the roads. So that is a large chunk of our business, and that
portion has gotten larger as the residential side has dropped.
So we are directly tied to the transportation spending.
The customers that we have tell us that they know they have
work to finish a year out, but next year, the year after, they
are not sure. So that makes us think twice about, all right, we
need to upgrade a piece of equipment, we need to buy a new
loader from Tom, but we don't know; are we going to have the
work for that load, or is it going to sit all next year? And
with the uncertainty that contractors are telling us, I mean,
our contractors have to make big investments in services as
well, and they are scared to do it, which in turn slows us
down, which, like I said, we are down 20 percent of our
manpower from 2 years ago. And for a company my size, that is
20 percent of people that we know real well, we see them
walking in the gate every day, saying hi to them, how is your
family. We don't want to lose any more of those people, so we
definitely need a long-term plan to give that some stability so
we can, in turn, have our company's stability and work for our
employees.
Chairman Altmire. Thank you.
I now recognize Congresswoman Fallin.
Ms. Fallin. Thank you, Mr. Chairman.
I think that goes right along, as you said, with my line of
questioning. I was just concerned that if we just do an
extension only here in Congress--which we don't support--how
would that affect your hiring and your maintenance of employees
that you have now, your investment into equipment because you
have to pay that off over years, and even the financing from
your bank loans? I would assume that you have lines of credit
that you have to draw from financial institutions, and you do
that based upon the work that you may have in the future. And
if you have uncertainty in the quantity of work that you are
going to have in the future, then I would assume you would have
to start looking at your workforce and planning ahead and the
equipment that you buy.
Are you even having trouble with the banks per se in
getting the financing? That has been another big issue we have
been talking about here is have we actually helped in Congress
to release that investment flow of capital, or have we actually
kind of caused the market to contract back to where the capital
is not even available for you?
Any of you.
Mr. Kirchhoff. Two points. First on the employment front.
It is pretty simple for us, although it is a gut-wrenching
decision. When you take a look at the revenue that were are
creating or that is being created for us for our business,
keeping our shops and our mechanics busy, the parts that we are
selling to contractors, as that slows, we can only afford to
keep a level of employment consistent with that level of
revenue. As I mentioned earlier, we are down about 30 percent
in our employment. Our business is off greater than 30 percent.
Our largest expense is employee expense and all the things that
go into that; health care, salaries, wages, and so forth. So as
business continues to deteriorate, that is one of the first
areas where we are forced to look.
As far as our banking goes, we are in a fairly fortunate
situation where we do have a source of funding. However, there
are covenants that come along with that source of funding, and
as our business underperforms, those covenants get tighter and
tighter. So we are constantly looking at that to make sure that
we don't have to go back out there and reapply for more funds
with our banks. But, again, keeping an eye on the top line and
the bottom line is where that difference comes in.
Ms. Fallin. Can I ask you a question; do you do any
exporting?
Mr. Kirchhoff. Very little; probably less than 5 percent of
our business is exporting. We have done more over the years,
but not so much this year.
Ms. Fallin. Okay. Anybody else want to respond?
Mr. Filipczak. I would like to take it just from an
equipment perspective. I mean, I guess we are fortunate in
that, from the financial perspective, we haven't seen any
additional pressure, but we are also not borrowing heavily. So
they would go hand in hand.
From an employee perspective, our employee count is more
project-based, and it is a little hard to connect the dots
between an extension versus the full authorization. But from a
capital expenditure perspective, I can say that 12 months or 18
months doesn't do it for us in terms of capital expenditures.
The service life of the equipment that we buy is between 5 and
maybe 12 years, somewhere in that range, and so we are
definitely not in the mode of buying equipment when we don't
have a long-term funding plan in place.
Ms. Fallin. Makes sense to me.
Mr. Chairman, I also have a request, if I can. I ask
unanimous consent to leave the record open for 5 days in order
for other interested parties to have access to putting
testimony into the record.
Chairman Altmire. Without objection.
Chairman Altmire. Again, thank you to each of you. You have
made a big difference by being here. We appreciate your taking
the time to join us today.
Thanks to Congressman Shuster for joining us as well.
This hearing has now adjourned.
[Whereupon, at 11:28 a.m., the Subcommittee was adjourned.]
[GRAPHIC] [TIFF OMITTED] T0949.001
[GRAPHIC] [TIFF OMITTED] T0949.002
[GRAPHIC] [TIFF OMITTED] T0949.003
[GRAPHIC] [TIFF OMITTED] T0949.004
[GRAPHIC] [TIFF OMITTED] T0949.005
[GRAPHIC] [TIFF OMITTED] T0949.006
[GRAPHIC] [TIFF OMITTED] T0949.007
[GRAPHIC] [TIFF OMITTED] T0949.008
[GRAPHIC] [TIFF OMITTED] T0949.009
[GRAPHIC] [TIFF OMITTED] T0949.010
[GRAPHIC] [TIFF OMITTED] T0949.011
[GRAPHIC] [TIFF OMITTED] T0949.012
[GRAPHIC] [TIFF OMITTED] T0949.013
[GRAPHIC] [TIFF OMITTED] T0949.014
[GRAPHIC] [TIFF OMITTED] T0949.015
[GRAPHIC] [TIFF OMITTED] T0949.016
[GRAPHIC] [TIFF OMITTED] T0949.017
[GRAPHIC] [TIFF OMITTED] T0949.018
[GRAPHIC] [TIFF OMITTED] T0949.019
[GRAPHIC] [TIFF OMITTED] T0949.020
[GRAPHIC] [TIFF OMITTED] T0949.021
[GRAPHIC] [TIFF OMITTED] T0949.022
[GRAPHIC] [TIFF OMITTED] T0949.023
[GRAPHIC] [TIFF OMITTED] T0949.024
[GRAPHIC] [TIFF OMITTED] T0949.025
[GRAPHIC] [TIFF OMITTED] T0949.026
[GRAPHIC] [TIFF OMITTED] T0949.027
[GRAPHIC] [TIFF OMITTED] T0949.028
[GRAPHIC] [TIFF OMITTED] T0949.029
[GRAPHIC] [TIFF OMITTED] T0949.030
[GRAPHIC] [TIFF OMITTED] T0949.031
[GRAPHIC] [TIFF OMITTED] T0949.032
[GRAPHIC] [TIFF OMITTED] T0949.033
[GRAPHIC] [TIFF OMITTED] T0949.034
[GRAPHIC] [TIFF OMITTED] T0949.035
[GRAPHIC] [TIFF OMITTED] T0949.036
[GRAPHIC] [TIFF OMITTED] T0949.037
[GRAPHIC] [TIFF OMITTED] T0949.038
[GRAPHIC] [TIFF OMITTED] T0949.039
[GRAPHIC] [TIFF OMITTED] T0949.040
[GRAPHIC] [TIFF OMITTED] T0949.041
[GRAPHIC] [TIFF OMITTED] T0949.042
[GRAPHIC] [TIFF OMITTED] T0949.043
[GRAPHIC] [TIFF OMITTED] T0949.044
[GRAPHIC] [TIFF OMITTED] T0949.045
[GRAPHIC] [TIFF OMITTED] T0949.046
[GRAPHIC] [TIFF OMITTED] T0949.047
[GRAPHIC] [TIFF OMITTED] T0949.048
[GRAPHIC] [TIFF OMITTED] T0949.049
[GRAPHIC] [TIFF OMITTED] T0949.050
[GRAPHIC] [TIFF OMITTED] T0949.051
[GRAPHIC] [TIFF OMITTED] T0949.052
[GRAPHIC] [TIFF OMITTED] T0949.053
[GRAPHIC] [TIFF OMITTED] T0949.054
[GRAPHIC] [TIFF OMITTED] T0949.055
[GRAPHIC] [TIFF OMITTED] T0949.056
[GRAPHIC] [TIFF OMITTED] T0949.057
[GRAPHIC] [TIFF OMITTED] T0949.058
[GRAPHIC] [TIFF OMITTED] T0949.059
[GRAPHIC] [TIFF OMITTED] T0949.060
[GRAPHIC] [TIFF OMITTED] T0949.061
[GRAPHIC] [TIFF OMITTED] T0949.062