In the Pipeline

Jesse Kelly may not like federal spending, but it is bringing millions to his family's construction business

When he's on the stump, Republican congressional candidate Jesse Kelly doesn't mince words about federal stimulus spending and earmarks.

"It must stop now," says Kelly, who promises to not seek any federal earmarks if he defeats Democratic Congresswoman Gabrielle Giffords in November. "This is bribery with taxpayer money, and it's a disgrace."

Kelly dismisses any notion that federal spending helps the economy.

"Government is not a job-creator," Kelly said last week at a debate with his fellow Republican candidates, including state Sen. Jonathan Paton and political newcomers Brian Miller and Andy Goss. "It is a job-crusher."

But for Don Kelly Construction, the firm where Kelly manages pipeline projects, government funding would appear to create quite a few jobs.

Kelly himself estimates that close to 90 percent of the firm's work comes from government contracts worth tens of millions of dollars. And around the country, the firm—which is owned by Kelly's father, Don Kelly—frequently bids on public-works projects funded by both stimulus dollars and federal earmarks.

Here in Pima County, Don Kelly Construction has recently done work on a Pima County sewer-pipeline project that was worth roughly $11 million to the company. While most of the funding for the project came from local bond dollars, $2 million came from stimulus funds.

Jesse Kelly says Don Kelly Construction bid on the Pima County job before the federal government got involved in helping fund it. He says in that case, the federal government shouldn't even be taking credit for contributing $2 million to the project.

"That doesn't sound like a stimulus project to me," Kelly says. "It sounds like the same-old, same-old government taking credit for something they didn't do."

But a review of projects around the country shows that Don Kelly Construction—which was founded by Don Kelly in the late 1990s, according to Jesse Kelly—isn't shy about bidding on contracts that are paid for by federal earmarks or stimulus funds:

• Don Kelly Construction won a $30.7 million contract to build an 11-mile segment of pipeline for the Lewis and Clark Regional Water System in May 2008, according to the project's Web site. The massive water-delivery system, designed to provide water to 300,000 people in South Dakota, Iowa and Minnesota, is now set to receive $56.6 million in federal stimulus dollars. The project is estimated to cost more than $462 million, with the federal government set to pick up 80 percent of the cost.

In 2008, the project received a $26.5 million earmark requested by a bipartisan group of Midwestern lawmakers.

Kelly says the federal government's commitment to provide funding for that project "stinks."

"It's not the federal government's job to fulfill local government's infrastructure work," Kelly says. "Now, with that project, as with any project, they are publicly bid jobs. Privately owned companies such as ours, we go bid them, and were the money comes from, we don't know."

• Don Kelly Construction placed a bid on a dam river levee project in Hidalgo County, Texas, that will be funded with stimulus dollars. The project was solicited in May 2009 with a total price tag between $25 million and $50 million.

• Don Kelly Construction is listed as a bidder on a portion of the Lake Oswego Interceptor Sewer project in Oregon that is worth $1 million to $4 million. Sen. Ron Wyden of Oregon has requested a $50 million earmark for the project.

• The Pagosa Springs Sun in Pagosa, Colo., reported last September that Don Kelly Construction placed a $4.3 million bid on a sewer project, although the company did not win the bid.

Kelly says it would "absolutely" be better for his family's company if the federal government did not fund these projects.

"What stimulates the economy is government getting out the way and letting businesses expand and stop punishing people for success," Kelly says. "Our company was in low-level discussions about expanding into a paving operation. Well, guess what? Barack Obama gets elected, and he starts massively raising taxes. We aren't expanding anything right now."

But the Obama administration and the Democratic Congress have actually cut taxes, with more than 40 percent of the cost of the $780 million stimulus attributed to tax cuts, including a variety of business tax cuts. Asked what tax hikes he's referencing, Kelly says the threat of not extending the Bush administration's income-tax cuts for the wealthiest 2 percent of Americans played a role in the company's decision to not expand.

Even though his family's business continues to bid on projects funded through stimulus dollars and earmarks, Kelly says the stimulus was not good for the overall economy.

"The stimulus is not about Don Kelly Construction, and it shouldn't be," Kelly says. "It's about the country as a whole. Even if the company itself—which is not my company—benefitted from these projects, that doesn't make it right at all."

He says he doesn't know if the company is seeking other work funded by stimulus dollars or earmarks.

"I don't have a clue," Kelly says. "I'm sure we're going after every single project that's out there, so there may be more."

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