The local agency responsible for restoring Metro East levees may take back responsibility for a major project in that effort over the U.S. Army Corps of Engineers’ refusal to require a project labor agreement.
The Southwestern Illinois Flood Prevention District Council is overseeing repairs and upgrades to the 74-mile levee system that protects the American Bottom – the Mississippi River floodplain that stretches from Alton to Columbia in Madison, St. Clair and Monroe counties. The area is home to 156,000 people and businesses that employ 55,000 workers.
A quarter-cent sales tax collected in the three counties since 2009 is paying for the work, aimed at restoring the levee systems to 100-year flood protection by 2015.
The council has established a policy of using project labor agreements for the work. A PLA is a pre-hire agreement that sets out wages, benefits and working conditions for a particular construction project.
Les Sterman, chief supervisor for the council, said PLAs are used for nearly every big construction project in southwestern Illinois.
“It’s generally accepted as good practice here,” he said. “It’s not a partisan issue. It’s not a ‘big labor’ issue.”
Under a PLA, contractors, whether union or non-union, agree to its terms when they submit bids and unions agree not to strike for the duration of the job.
“(PLAs) have resulted in great stability in the workplace,” Sterman said. “They do not increase costs. They may even stimulate competition.”
All three contracts the council has already awarded are under PLAs and bids came in below estimates, Sterman said.
“We had a significant number of bids for each of those projects,” he said. “It’s local tax money (paying for the work). We want to support the local workforce.”
Sterman said PLAs are common in southwestern Illinois on projects large and small.
At issue is a project aimed at stopping underseepage of about 8,000 feet of existing levees in the Wood River Drainage and Levee District.
Sterman said the council’s consulting engineers completed designs in December for two cutoff walls to address the problem, but the Corps subsequently offered to take over the project.
Underseepage occurs when river water finds a path beneath a levee and erupts as a sand boil on the other side. Uncontrolled underseepage can cause levee failure. Although the Metro East levees protected the floodplain through the Great Flood of 1993, that and subsequent floods exposed numerous underseepage problems.
All levee projects are subject to Corps approval and Sterman said the Wood River project was subject to three levels of review by the Corps as well as outside peer review.
He said Corps officials expect to have enough money to take on the project in 2014 and told the council the Corps could do its own design and get it approved more quickly than the district’s design could be approved.
The deal offered funding advantages, too. Managed by the Corps, the project – which is expected to cost as much as $20 million — would be 65 percent federally funded and 35 percent locally funded, rather than 100 percent locally funded.
But the Corps has twice declined to use a PLA for the project.
“They concluded there was no benefit to the federal government,” Sterman said.
“The Corps cannot require a PLA,” said Mike Petersen, a spokesman for the Corps’ St. Louis District.
PLAs are typically not used on federal construction projects expected to cost less than $25,000 but the St. Louis District decided to consider the council’s request anyway, Petersen said. He said the Corps did market analyses, consulted experts and examined the history of construction work in the area.
“The research didn’t show a benefit from the federal perspective,” he said. “(The Corps has) done levee work in the Metro East for decades without PLAs.”
That decision attracted the attention of U.S. Sen. Dick Durbin (D-Ill.) and U.S. Rep. Bill Enyart (D-Belleville). In a letter, they strongly urged Assistant Secretary of the Army Jo-Ellen Darcy to include PLAs in any subsequent levee projects.
The letter called the decision “baffling to a community that has so strongly pursued this project.”
Durbin and Enyart had previously written to Darcy, citing an executive order of President Barack Obama in February 2009 encouraging the use of PLAs on federal construction projects.
Petersen said the Corps had reconsidered its decision but came to the same conclusion.
A recent edition of “Metro East Update,” an online publication of the Corps that follows the progress of the levee work, says the Corps “must ensure federal investment will deliver the best value to the nation.”
The posting also cites advice from the Deep Foundation Institute, a nonprofit technical association of experts in deep-foundation construction, that “the expertise and technical skill needed to construct deep cutoff walls would require considering a wider pool of expert contractors for this work.”
Petersen said prospective contractors may choose to submit PLA bid proposals but the Corps will not require that.
Sterman, in an Oct. 4 letter to Col. Christopher Hall, commander of the St. Louis District, again asked the Corps to reconsider the PLA decision.
Metro East officials hope a decline in sales tax revenues that began last year is only temporary.
“We’re probably at 2010 levels,” said Les Sterman, chief supervisor for the Southwestern Illinois Flood Prevention District Council. “It’s certainly an area of concern.”
Sluggish sales tax collections are a direct indicator of lackluster retail sales and affect state, county and municipal governments and local agencies like the flood prevention district that depend partially or entirely on those revenues to pay for services they provide.
Sales taxes provide a portion of revenues for counties, cities and villages but are the sole source of revenue for agencies like the flood prevention district and the Metro East Park and Recreation District, which receives a one-tenth-cent tax on retail sales in Madison and St. Clair counties.
The flood prevention district is in charge of repairs to the levees that protect the Mississippi River flood plain, which stretches from Alton to Columbia. A quarter-cent sales tax is collected in Madison, St. Clair and Monroe counties to fund the big repair project.
The district began receiving the tax in January 2009, in the depths of the recent recession. The tax brought in $10.3 million in 2009 and $11.0 million in 2010, an increase of nearly 7 percent.
“We saw a nice recovery after the recession,” Sterman said.
In 2011, however, revenue from the tax grew just
under 2 percent and in 2012 grew by only 0.26 percent. In June 2012, monthly receipts began coming in lower than the corresponding months in 2011, a trend that continued through June of this year with the exception of but one month.
Statewide, sales and use tax collections over those months showed only slightly more growth than in Metro East. Total collections statewide were up only 1.8 percent during the state’s fiscal 2013, which began in July 2012 and ended at the end of June. That followed a 5.7 percent gain for fiscal 2012.
The state’s 1.8 percent increase for fiscal 2013 barely topped the 1.6 percent rate of inflation, the Illinois Department of Revenue noted in its monthly revenue report for June.
The same report said the previous two fiscal years “had very strong growth thanks to pent-up demand that accrued during the cutbacks of the last recession. As this pent-up demand began to fade at the end of fiscal year 2012, we knew 2013’s sales and use tax receipts would more closely reflect the current economic conditions, especially changes in employment and wages. Modest gains by both helped keep sales and use tax growth low in fiscal year 2013.”
Lower-than-expected tax receipts are not expected to threaten the levee repair project. They should be sufficient to pay back the money the district borrows to finance the construction.
“We have leaned on our engineers to be frugal,” Sterman said. “I think we’re going to be fine.”
Sterman said bids have been coming in lower than estimates and the overall cost of the project is now estimated at $120 million to $130 million, as much as $30 million less than early estimates.
“What retailers see is that growth is coming back but it’s very slow and slower than they would like,” said Peter Gill, spokesman for the Illinois Retail Merchants Association. “There’s nothing to be thrilled about but it’s steady-as-we-go.”
With continuing high unemployment, “it’s still a struggle for a lot of consumers,” Gill said. And he said the ongoing budget bickering in Washington creates uncertainty and undermines consumers’ confidence about the overall economy and their own jobs.
Gill said Illinois merchants had an “OK” back-to-school season and are optimistic about the coming holiday season.
Joe Parente, Madison County’s director of administration, said county officials have noticed the weakness of sales tax receipts but don’t have an explanation. He said county government’s sales tax receipts for the first eight months of 2013 were down about 3 percent compared to 2012.
Sterman theorized that Metro East consumers had less to spend following the completion of two massive construction projects that provided work for many of them – the building of the $4 billion Prairie State Energy Campus in Washington County and the $3.8 billion expansion of the Phillips 66 Wood River Refinery in Roxana. He said he thought employment had also declined at Scott Air Force Base, Metro East’s largest employer.
Unemployment has declined since the worst of the recession but remains stubbornly high. The state’s unemployment rate in August was 9.0 percent; the rate for the Illinois portion of the St. Louis MSA (Madison, St. Clair, Monroe, Clinton and Jersey counties) was 8.5 percent.
John Meisel, professor of economics and finance at Southern Illinois University Edwardsville, said wages have been stagnant at SIUE, community colleges and other institutions and agencies that rely on state government funding. He said pay for employees at SIUE, the area’s third-largest employer, have risen only 1 percent or 2 percent a year over six years, less than the rate of inflation.
Meisel said consumer spending is a function of income and borrowing. He said incomes have been stagnant or worse and the volume of borrowing remains low despite very low interest rates.
“People don’t have confidence the economy is going to improve,” and when they don’t have that confidence, they are reluctant to borrow, he said.
Ellen Krohne, executive director of Leadership Council Southwestern Illinois, said the budget wrangling in Washington had likely impacted the area’s economy by way of furloughs and sequestration. Krohne said recent month’s sales tax receipts show signs of improvement.
“We’re hoping that momentum will continue into the holiday season,” she said.
Statewide sales tax receipts provide some reason for optimism. They were up a surprising 7.7 percent – $139 million – for the first three months of fiscal 2014, according to the state Legislature’s Commission on Government Forecasting and Accountability.
The new health insurance COOP that was announced in the February issue of the Illinois Business Journal, is now up and running and accepting customers.
“It’s going excellently,” said Daniel Yunker, CEO of Land of Lincoln Health. “We’ve successfully built 35 health plans available for consumer access. The plans are on the exchange and we’ve designed those health plans to hopefully fit all budgets.”
While some insurance companies have been creating policies for the exchanges that limit in-network providers, Land of Lincoln has focused on building a network of health care providers that its policy holders want to utilize.
“We have a broad panel of quality hospitals and doctors throughout the State of Illinois, in all 13 rating areas, and they’re available across all 35 of our plans,” said Yunker.
But Land of Lincoln’s network is not limited to Illinois. It extends throughout the nation, Yunker said. A full list of providers can be found on the Land of Lincoln Health website.
Land of Lincoln Health is a COOP (Consumer Oriented and Operated Plan) that was created pursuant to the Patient Protection and Affordable Care Act. COOPs are private, member-run, nonprofit organizations that will sell health insurance coverage and will be subject to the same rules as other health insurers. COOPS differ from health insurance companies because they are member-run and required to use their revenues in excess of expenses to lower premiums, improve health benefits, improve the quality of health care, expand enrollment or otherwise contribute to the stability of coverage for members.
The ACA not only authorized the creation of COOPs but established a forgivable loan fund to help them get started. Land of Lincoln was the 24th and last COOP approved under the act and it received a $160 million forgivable loan from the federal government. Some $15 million of that amount was used for startup expenses, including hiring staff, securing office space and buying computer equipment. The remaining $145 million will be used to fund reserves. A total $1.8 billion has been distributed by the federal government to the 24 COOPs.
Prior to passage of the ACA, applications for health insurance policies covered a rather extensive examination of existing conditions and prior illnesses and injuries. That’s no longer the case, Yunker said. Now there are only three criteria used in pricing a policy: age, geographic area and smoking behavior.
“Health insurance can be complicated,” said Yunker, “but we’ve done a lot here at Land of Lincoln Health to try to make it simpler for consumers. We want our plans to be easy to choose and easy to use.”
With winning approval and receiving the loan award late last year, Land of Lincoln had a lot to do to start up the company and get it operational in time for the debut of the health insurance marketplaces on Oct. 1. Yunker said organizers had to secure space, buy equipment and hire staff, but they were able to streamline the process by developing partnerships with existing companies.
Land of Lincoln Health currently has 34 employees, but Yunker estimates that, when including the partners, there are more than 250 people working to provide Land of Lincoln services.
“Our team is comprised of group health insurance company experience at the leadership level as well as the operational level,” Yunker said, calling it “deep experience in the benefits area and deep experience in health care in general. We think that it’s because of this great foundation and collaboration of some strong talent that we’ve been able to successfully build Land of Lincoln Health thus far.”
Yunker said that there are an estimated 1.8 million uninsured people in Illinois with more continually entering the pool plus individuals and employers who may consider switching insurance companies. Land of Lincoln’s target is to enroll 40,000 customers by the end of 2014.
Illinois’ health insurance marketplace called “Get Covered Illinois” includes 165 plans offered by eight different insurance companies. With all of the options confronting consumers, Yunker recommends that shoppers don’t just look at price but also product.
“When pricing health insurance, it is really important to look at it from a perspective of total cost, not just the monthly premium,” he said. “You need to also consider the deductible levels and copays as well as various benefits that are included, like pharmacy benefits and so forth. We focused a lot on total cost and our 35 plans are competitive across all rating areas.”
He added: “But, we’ve taken the strategic approach that we wanted to design our 35 insurance plans to have lower deductibles, which means they will have slightly higher monthly premiums. But, what’s important is we want folks to be able to use their health plan. We don’t want them to think they have insurance and then not be able to use it.”