With $175 billion authorized for highway funding over the next six years in the Transportation Equity Act for the 21st Century (TEA-21) asphalt and concrete paving contractors and materials suppliers will be seeing their share of dollars and work in maintenance, rehabilitation and new construction projects. But exactly how much the paving industry stands to benefit remains to be seen.
Highway contractors say that although they are expecting significant increases in work, they will not see the windfall profits that have been attributed to them in media reports.
Perhaps TEA-21’s most direct impact on the paving industry occurs in research. For the first time a provision in the act designates funding specifically for concrete pavement research while the asphalt industry finds three of its major research vehicles left underfunded or unfunded entirely. If left unremedied, the well-being of the asphalt industry’s Superpave (superior performing asphalt pavements) initiative for development of longer-lasting performance-based asphalt binder and mix designs could be greatly hindered.
Highway funds that affect the asphalt and concrete industry are found in an array of programs spread throughout the highway program portion of the act. The principal areas are: Interstate Maintenance (IM) ($23.8 billion); the National Highway System (NHS) ($28.6 billion); and Surface Transportation Program (STP) ($33.3 billion). Together, funding for these three programs equals $85.7 billion. Additional programs that will mean dollars for the paving sector include the Minimum Guarantee program and priority projects.
The Minimum Guarantee program is a new program that ensures each state a 90.5% return on their Highway Trust Fund contributions. According to the Federal Highway Administration (FHWA), the program comprises 21.2% of federal highway investment in TEA-21 or approximately $37 billion. The act contains 1,850 high-priority projects, many of which are related to roadway construction.
The amount of money that finds its way into paving projects is dependent on a number of factors. The act is designed to provide flexibility for states to use highway program funds in areas where they feel the money is most needed. Funds also can be used for environmental and high-tech projects such as natural habitat enhancement, pollution abatement and infrastructure-based intelligent transportation system capital improvements (see Moving into the Mainstream, TM&S, September 1998, p 10). Faced with additional federal funding, states also must come up with their share of matching funds before they can use the TEA-21 money. This also may impact how many new paving jobs are planned and let for bid.
“We’re viewing the bill as a very good bill,” Dale Decker, vice president of marketing and technology for the National Asphalt Pavement Association (NAPA), told ROADS & BRIDGES. “It puts a lot more money into building highways. For most states there is a good increase in funding. It’s money that belongs there anyway. It’s trust fund money for motorists.”
“The funding and the fact that it’s guaranteed is unprecedented,” said Val Riva, president of the American Concrete Pavement Association (ACPA). “We’re very pleased with TEA-21. The House and Senate leadership really pushed for it. Here we have two successive bills in which Congress has confirmed that expenditures on highways are critical. It’s a vote of confidence that infrastructure is the engine that drives our economic growth.”
Hunt for research dollars
The reduction in research dollars in the act is a source of trepidation for the asphalt industry. “Of concern is funding for research activities, particularly in the Superpave area,” said Decker. “The Superpave models contract may not receive as much funding.” According to NAPA, the Long-Term Pavement Performance Program (LTPP) will receive less funding and WesTrack, the Superpave performance test track near Reno, Nev., isn’t slated to receive any funding. “WesTrack needs an added million dollars to finish,” said Decker.
Although happy with the act because it ensures use of gas taxes in the highway program, will improve highways, and places the decision making more in the hands of the states who understand their needs the best, Ed Miller, president of the Asphalt Institute in Lexington, Ky., said he is disappointed in the reduction in research levels. “It has a major impact on Superpave,” he said. “The government made a promise to the public to develop and implement Superpave. Now is not the right time to go back. They took it halfway. It’s time to finish the job.”
Unlike their counterparts in asphalt, the concrete sector is excited about how it faired in research funding. A provision designates $5 million a year over the six-year life of the bill for a program of research on improved methods of using concrete pavement in construction, reconstruction and repair of federal-aid highways.
“It’s the first time to our knowledge that money has been designated for concrete pavement research,” said Riva. “It’s an expression of confidence by Congress that concrete deserves recognition as an area that merits research. We hope the money is applied for practical research that leads to tangible results.
“Concrete is no longer viewed as a secondary item of interest. We’re pleased with that.” While the money is designated for the program, Riva added that it is not earmarked as some believe. “It’s designated funding that has to be used for that purpose, but it does not go to this university or that university.”
A changing business
The states’ role in research is being increased significantly. “The research funding scenario will change,” Decker said. “The emphasis is switching from an FHWA-based program to a state-based program. It will be changing the way we do business.”
According to Decker, funding for the State Planning and Research (SP&R) program is increasing by 51%. “There is a huge SP&R program.” According to NAPA, SP&R funding under the previous surface transportation act, the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), totaled $320 million. Under TEA-21 the figure escalates to $500 million.
On the federal side, according to Decker, FHWA dollars for research and technology are increasing by 5%, but much of it is earmarked. “Thirty-five percent of the program is earmarked and 45% is otherwise directed, so only 20% of the money has any flexibility at all,” Decker said. “There isn’t enough money for some of the programs that are funded under flexible dollars.”
How does this affect the LTPP program, Superpave implementation and WesTrack?
The purpose of the 10-year-old LTPP program, as the name implies, was to evaluate pavement performance over a 20-year period. According to NAPA, the program presents an opportunity for long-term validation of pavement performance that is unprecedented in the industry. The program requires an estimated $16 million a year to continue the data collection and analysis process. TEA-21 provides $9 million a year.
The Superpave models development contract is one of the major research needs affecting implementation of the Superpave process, according to NAPA. The contract, which FHWA has with the University of Maryland is focused on developing a performance test along with prediction models that help engineers predict the performance of asphalt mixes, prediction methods that do not currently exist. It is NAPA’s belief that the model contract, together with the NCHRP (National Cooperative Highway Research Program) mechanistic design guide project, will “set the stage for the pavement design and evaluation process for the next half century—much as was done by the AASHO [American Association of State Highway Officials] Road Test.”
The FHWA estimate is that Superpave implementation needs $11 million a year for completion, with $2 million a year going to the models contract. Under TEA-21, no funds are provided for continuation of Superpave implementation.
The WesTrack test track, built to evaluate construction variation on the performance of HMA mixes, includes some Superpave mixes. A total of $14 million has thus far been spent on the project. According to NAPA, the project is slated to complete data analysis and report preparation next year and requires $1.5 million to do so. FHWA has $400,000 remaining to complete the project, which falls $1.1 million short of the estimated dollars needed for completion.
There is hope, however, for these asphalt research programs, according to Decker. “There is a recognition that there are creative ways in which we can get the job done,” he said. Decker said that states will likely look to conducting pooled-fund studies, which will allow them to better manage their resources and perform larger studies. “The pooled-fund idea is well-accepted by AASHTO [American Association of State Highway & Transportation Officials, the successor to AASHO],” said Decker. “Their subcommittees also have said they need to continue projects like LTPP and WesTrack.”
“We’re elated over the increased funding and higher return on the federal tax dollar,” said Tone Garrett, executive director of the Mississippi Asphalt Pavement Association, which represents the interests of asphalt contractors and producers in the Magnolia State. “We’re a donor state and we’re getting back a larger portion of our gas-tax dollars in Mississippi.” According to Garrett, the state will see a return on each gas-tax dollar that it sends to Washington, D.C., of 92 cents, up from 84 cents prior to TEA-21. “We’re getting a more equitable highway program.”
Garrett said that because more money is in the act for road maintenance, he looks for a great deal of new 3R (restoration, resurfacing, rehabilitation) work to be done in the state. “Mississippi is predominantly an asphalt state and for four years we’ve been stealing maintenance dollars to build new roads.”
The Superpave research and implementation funding issue significantly affects Garrett’s state because it has been actively involved in building Superpave pavements since 1997. “We’ve had problems,” Garrett said, “but the pavements we’re building today are superior to those we had before.”
“In the western states, California being the largest, Nevada and Arizona, we’re increasing 50%,” said Tom Salata, executive director of the Western States Chapter of the American Concrete Pavement Association. “Those kind of numbers can only help.”
According to Salata, the chapter is preparing for TEA-21 projects that won’t be out until 2000 and after. “At least it gives us the opportunity to have work there,” he said. “In recessionary times there was no work for anybody. We expect good things from it.”
Fred Frecker, P.E., president of Flexible Pavements Inc., Ohio’s asphalt paving association, said that although Congress’ appropriations committees look to be following through on appropriating funds, he isn’t sure how much his industry will gain in Ohio because of the flexibility in the act.
“It will vary from state to state,” said Frecker, who also is chairman of the State Asphalt Pavement Executives, a loose affiliation of state asphalt pavement associations coordinated by NAPA. “Some states may put more money toward repairing roads, others toward something else,” he said. “It will undoubtedly make more work, but exactly how much more remains to be seen.” He estimates the asphalt market will see approximately a 12% increase.
“We’re apprehensive about getting overly excited about it,” said Kurt Bechtel, vice president of Payne and Dolan, a Waukasha, Wis.-based asphalt contractor. “It’s a good start. The federal side has done its work and now its up to states to see that the money ends up where it’s supposed to, which is in infrastructure.”
What is the funding outlook for asphalt paving in the Badger State? “It’ll be a good amount more, but not a huge amount more,” said Bechtel, who also is the 1998 president of the Wisconsin Road Builders association. “Any time you read anything in the media it sounds like [TEA-21] is going to totally change the industry. Hopefully it will mean more money, but federal funds are only part of it. In Wisconsin, there’s talk of possibly diverting funds. If the state chooses it can just use less state funds. It will hopefully mean more work and a better transportation system.”
If Wisconsin does devote more funds to highway work, Bechtel said that asphalt contractors would be ready and able to respond. “Right now in the state, we’ve got more capacity than we have work out there.”
As past chairman of NAPA, Tom Ritchie, president and CEO of Ritchie Paving, Wichita, Kan., told ROADS & BRIDGES that he was happy with the act, especially since it was a goal of his when he was NAPA chairman in 1997. “It was a long time coming,” he said.
Ritchie said he is most pleased because the act will enable deteriorated and unsafe roads to be repaired. “Three of my best friends were killed recently in a car accident involving hydroplaning. That didn’t have to happen.”
Improved roads benefit businesses of all types, Ritchie said. In addition to building asphalt pavements, Ritchie Paving also is in the sand business and transports other construction materials. As part of 1989 state road program a section of the East K96 highway bypass around Wichita was improved. Over a period of time, the company hauled a half a million tons of crushed rock along the route.
The company did a study on the benefits the road improvement provided the company. According to Ritchie, the improved section saved 30 minutes on a round trip in the area for a savings of $350,000 a year. “Improved roads are an economic benefit that pays rather than costs,” Ritchie said.
“Our seven-year state highway program fixed about 16% of what needed to be fixed,” said Ritchie. “The extra federal funding will help make a bigger dent. The state still has to come up with the matching funds, however.”
Don Beuerlein, president of Koss Construction, West Des Moines, Iowa, said the Hawkeye State is behind the act. “We’re in favor of it,” he said. “Since 1970 the U.S. has increased 18 times in miles driven compared to miles of highways built.”
He shares Ritchie’s sentiment that the act will benefit highway safety. “Forty thousand people are killed annually on our highways. If those people were killed in a war we’d have a march on the White House.”
In Kansas and Oklahoma, Beuerlein estimates the work load of paving contractors will increase 25%, but contractors in the states should have no trouble in handling the extra work. “There’s no shortage of contractors,” he said. “There are six to eight contractors bidding on every project. I do think that some of the materials industries, such as the aggregate and cement suppliers will be hard pressed to keep up with demand.”
Traditionally, the asphalt and concrete sectors have been strong competitors, and although both factions worked to gain passage of the act, the competition remains. This can be seen in reaction to a provision in the act pertaining to life-cycle cost analysis. Wording in the act recommends that life-cycle cost analysis—the process of taking into account the expected costs of a project over its lifetime rather than only its up-front costs—be performed on construction projects.
“FHWA is encouraging life-cycle cost analysis,” said Western States’ Salata. “All elements of life-cycle cost will benefit concrete.”
“Life-cycle cost is a tool in the tool box to be used along with other tools,” said Flexible Pavements’ Frecker. “You’re supposed to look 35 years down the road at maintenance levels, what you’ll need to do and when you’ll need to do it, as well as figure inflation and interest rates. Thirty-five years from now we’ll be using technology nobody that nobody knows about today.
Frecker said that the wording in the act has lead to confusion in many FHWA districts. “You have states where the FHWA district takes ‘recommended’ to mean that life-cycle cost must be used,” he said. “I’ve seen some people make a decision based on a 5% savings in life-cycle cost and throw away a 20% savings in initial cost.”
Exciting times ahead
Despite some of the challenges created by TEA-21, the act sets the asphalt and concrete paving industry on a path toward longer-lasting pavements that will benefit not only the industry, but the nation’s motorists and the economy.
“We are the verge of really changing the way we look at mix design and structural design,” said Decker, who is a member of the 2002 AASHTO Design Guide Panel. “It’s an exciting change that we’re faced with in removing the AASHTO Design Guide from our business and replacing it with a mechanistic-based design system.
TEA-21 to boost asphalt, concrete sales
Increased federal spending for highways and mass transit in TEA-21 should result in an increase in shipments of asphalt products of almost $700 million by 2003 and an increase in shipments of concrete products of over $800 million, according to a report by Bill Buecher, an economist for the American Road & Transportation Builders Association (ARTBA).
The figures include both direct and indirect sales, which are sales generated by the initial spending on highways and mass transit plus the indirect sales generated by the increased output of other industries.
According to the report, the increases would represent a 7% increase in shipments of asphalt products over the 1997 level of about $10 billion and a 3% increase in shipments of concrete products over the 1997 level of about $26 billion.
In an report issued earlier this year, Buecher said that 58% of the output of the asphalt industry is used in transportation construction—mainly highways—and 14.5% to 22.5% of the output of the concrete industry is used in transportation construction.
Citing the latest input-output data released by the U.S. Department of Commerce, ARTBA said that each $1 billion of highway spending generates $69.2 million in shipments of asphalt products—including asphalt paving mixtures and asphalt felts and coatings—and $77.4 million in shipments of concrete products—including concrete blocks, other concrete products and ready-mix concrete.
Each $1 billion of spending on mass transit programs results in $19.5 million in shipments of concrete products, while the impact on asphalt is minuscule.