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Finkenauer seeks to end ‘loophole’ in Iowa use of federal transportation funds
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Finkenauer seeks to end ‘loophole’ in Iowa use of federal transportation funds

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Continuing a fight she started as a member of the Iowa House, U.S. Rep. Abby Finkenauer is introducing legislation to promote using American-made construction materials and paying construction workers the local prevailing wage.

Finkenauer, a member of the House Transportation and Infrastructure Committee, is offering the Stop Swaps, Protect Local Jobs Act to prevent states and local governments from using “fund swapping” to avoid federal labor and purchasing requirements on federally funded projects.

Her legislation, which the first-term Democrat hopes will be included in a larger surface transportation bill, would close what she calls a loophole that allows states, including Iowa, to circumvent provisions and federal infrastructure funding that require paying fair wages, such as in the Davis-Bacon Act and made-in-America provisions.

“The whole point of this is to be able to keep jobs local, to make sure that we’re supporting our local manufacturers as we do it,” said Finkenauer, who chairs the subcommittee on highways and transit.

Finkenauer, who is running for re-election, anticipates Congress will approve a large funding package to address infrastructure needs and provide an economic stimulus to help the nation recover from the business shutdown caused by the coronavirus pandemic.

“If we’re going to be making those large investments in infrastructure that are intended to create good-paying jobs to stimulate our economy, we better be protecting the provision that does that,” Finkenauer said.

The issue isn’t new to Finkenauer.

She voted against the creation of a fund swap program in Iowa as a member of the Legislature in 2017. Iowa is among at least 10 states that have fund-swap programs for transportation funding.

Davenport example

To illustrate the problem she sees with fund swaps, Finkenauer points to a Davenport street reconstruction and widening. Using a fund swap, the city awarded a $6.3 million contract that didn’t include labor and buy American provisions. An alternate bid for $6.7 million included those provisions.

So while the city “saved” $400,000, she said, “it lost an estimated $800,000 in wages and benefits for local workers on the project — $800,000 that would have helped local families, contributed to the local tax base and powered the local economy.”

Overall, she said, as of May 2019, 25 percent — 104 of the state’s 414 infrastructure projects — made available for contract bids took advantage of fund swapping.

Argument for

The argument for fund swaps is that without the federal requirements, the state can make the money go further and get more work done.

Stuart Anderson, director of the Planning, Programming and Modal Division of the Iowa Department of Transportation, said many cities and counties do not have in-house staff to design, develop and engineer transportation projects. Hiring outside consultants can increase costs and delay completion by six months.

The DOT has planners, engineers, designers and materials technicians on staff. When local governments swap funds with the DOT, projects can be developed and built more quickly and often at a lower cost, Anderson says.

In exchange for every federal dollar the DOT receives from local jurisdictions, the city or county gets a dollar of state Road Use Tax Fund money, Anderson says. When the DOT spends those federal dollars, it is subject to the same wage and buy-American provisions as if the money was spent by the local government, he said.

State response

Finkenauer recalls that reasoning from the legislative debate when the state fund-swap program was created.

“I remember one of the arguments was they’d rather have four bridges than one bridge,” Finkenauer said earlier this week. “As I like to say, and as I know many other people would agree with, I’d rather have one bridge that was done with American steel and American labor, and know it’s going to stand the test of time, than four bridges that are going to fall down in 20 years.”

Anderson said the design standards are the same, regardless of whether a fund swap is used.

“We don’t develop a project differently. We have very detailed specifications for design, for materials, for construction,” he said. “The life of bridges is the same whether state or federally funded. The quality is not impacted.”

Local support

Finkenauer’s proposal has support from unions as well as some local governments.

Fund swaps “take money out of workers’ pockets,” according to Bill Gerhard, president of the Iowa State Building and Construction Trades Council. Finkenauer’s plan would end “a scheme that does real damage to local workers and manufacturers.”

It also would ensure that “no local businesses would be left behind from having an equitable opportunity to compete for federal contracts,” Waterloo Mayor Quentin Hart said.

The program is under review by the federal Government Accounting Office at Finkenauer’s request. Anderson said the DOT has spoken with the GAO and is looking forward to its report.

The Iowa DOT has used fund swap for about two years, so it still is in the learning process, Anderson said. Staff members are having conversations with peers in other states.

“We’ll come back and look at the policy as we get more experience,” he said. “I expect there will be some lessons learned.”

For Finkenauer, the goal is to get her bill included in the next surface transportation act.

“I’d like this provision to be included as we move forward to make sure these investments are used the way that they should be,” she said.



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