City Turns Down $2.5 Million Stimulus

Beware the attached strings. Stimulus rules may make it profitable to refuse money. That is what the city of Portsmouth found out when reviewing grants from the American Recovery and Reinvestment Act.

Please consider Portsmouth says no to $2.5M in stimulus funds

As stimulating as it might have sounded at the time, the city recently declined $2.5 million from the American Recovery and Reinvestment Act for its new water treatment plant because federal wage regulations would have forced the city to pay more for the project.

Ranked as the fifth most pressing drinking water project in the state, the state Department of Environmental Services awarded the city $5 million in March 2009 for the project — half of which would be a grant, and the other half borrowed from the state's low-interest revolving loan fund.

When the bids came in, the low bidder — Penta Corporation — presented final cost of $21 million with the stimulus funds and $17.3 million without.

Stimulus funds mandate workers are paid using Davis-Bacon Wage Determination, which sets the pay scale for workers on federal projects and added $2.5 million to the bottom line.

The "Buy American" provision would've added another $500,000 and Allen said there would have been significant administrative costs — upwards of $100,000 — for the city to track it the way the government requires over the course of the two-year project.

Articles like this are a clear indication that much stimulus money is wasted in bureaucratic red tape, monitoring, and above all union work rules.

For more on Davis Bacon please see

Prevailing Wages - Your Stimulus Dollars At Work

Thoughts on the Davis Bacon Act

The Davis-Bacon act is a real porker and it needs to go. Taxpayers should expect to see jobs completed for the least amount of money possible, not the most.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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