Money trails are becoming increasingly difficult to find on the road and bridge landscape.
The year 2006 was the beginning of what could be a massive transformation for departments of transportation nationwide. As the lack of funding at the federal level weighs heavier on crippling infrastructure, those at the state level are starting to talk about other ways to generate cash. Despite the stunt in financial growth, the road and bridge industry continues to churn out record numbers, and with material costs showing signs of decline heading into the new year, promise and prosperity could dot the map heavily in 2007.
Where’s the money?
Power may have shifted in Congress, but the same power struggle exists when it comes to passing transportation funding.
Both the House and Senate recessed before an appropriations bill was worked out. Incoming chairmen of the House and Senate Appropriations Committees—Rep. David Obey (D-Wis.) and Sen. Robert Byrd (D-W.Va.)—announced they plan to wrap up all outstanding funding bills for FY 2007 into one measure. The plan indicated “limited adjustments” may be made, but it did not identify which programs were at risk. Under SAFETEA-LU, the transportation industry is supposed to receive a considerable increase—$3.4 billion for highways and $474 million for transit—over 2005, but the recent move may put it all in jeopardy.
“This would have a significant impact on the state DOT planning process,” Matt Jeanneret, senior vice president of communications and marketing for the American Road & Transportation Builders Association (ARTBA), told Roads & Bridges. “The longer that money is off the table, the longer the public waits to see the benefits.”
Current funding runs out on Feb. 15, and Jeanneret does not believe any action will be taken before then. As of late December, only two of the 11 bills have passed, and President George W. Bush is expected to introduce his 2008 budget sometime in February. Adding to the lag time is the arrival of new members of Congress. Democrats have vowed to expedite the process when the Senate and House are back in session, but a lot of question marks hang over Washington.
“There are a lot of scenarios,” said Jeanneret. “What happens if Tim Johnson (D-S.D.) does not recover [from brain surgery]? That’s an unknown. What does that do in the Senate?”
In the meantime, states continue to struggle to come up with ways to pay for badly needed road and bridge projects. Pennsylvania is the latest state that may shake the hands of private investors. Gov. Edward Rendell and Pennsylvania Transportation Secretary Al Biehler announced in early December that the commonwealth will solicit expressions of interest from private firms to determine the potential value of leasing or privatizing the Pennsylvania Turnpike.
“We are at the very beginning process,” Rich Kirkpatrick, spokesman for PennDOT, told Roads & Bridges. “We are waiting to see what kind of expressions of interest we get and go from there.”
Reaching destinations can be a little rough if traveling by road in Pennsylvania. The state’s Transportation Funding and Reform Commission recently released a report on a 16-month review of the entire transportation landscape. The report called for a total of $900 million in additional revenue needs on the highway and bridge side and $760 million on the transit side.
According to Kirkpatrick, roughly 24% of state-owned bridges are structurally deficient. The national average is 11%. “Even with the additional revenue the commission talked about, it will still take 17 years to bring that 24% down to that 11% range,” said Kirkpatrick.
Still, 2006 was a record-breaking year for road and bridge construction activity. An ARTBA report revealed that the value of work on highways, bridges, airports and transit systems was up 15% over the last year, a feat that has not been done for over 20 years.
Fueled by increased federal, state and local highway investments, a $2.3 billion congressional appropriation for repair work on highways damaged by Hurricane Katrina and greater investments in freight rail, the total value of construction performed on transportation projects was expected to hit a record $106 billion in 2006, up from $92 billion in 2005.
Highway and bridge construction provided the biggest punch, with the value of construction work growing almost $11 billion to $76.3 billion, the largest increase since 1984 when Congress was funding extra highway construction to help end a severe recession.
Building over
Louisiana fell into a hole. Missouri was pushed. Both reached closer to daylight in 2006.
Hurricanes Katrina and Rita left New Orleans a federal disaster area. Bridges were destroyed and major roads were left underwater for weeks. The Louisiana Department of Transportation and Development (LADOTD), however, did not flinch in the chaotic aftermath.
Temporary repairs were made to the twin-span I-10 bridge, but designs were quickly finalized for a new structure. The new 1-10 bridge, currently under construction, will contain three lanes plus ample shoulder room, stretch 5.5 miles long, wired with the latest in intelligent transportation systems, and at 30 ft will be 20 ft higher than the original twins.
Officials hope the extra height will prevent the powerful tidal surges experienced during Katrina from doing future damage. The first of the two spans will be completed by 2009. The entire bridge will be functional by 2011.
Road reconstruction, however, may take time to make a complete recovery. According to Eric Kalivoda, assistant secretary in the Office of Planning and Programming for the LADOTD, about 2,000 miles of road sat underwater for up to five weeks after the levees broke following Hurricane Katrina. The flooding left the road bases of arterial routes, collector roads and neighborhood streets vulnerable to attack.
“They are already breaking down, but the question is is it a result of the weakness in the base or a result of all the debris hauling?” Kalivoda told Roads & Bridges. “We have some serious problems with the pavements. They are showing great distress.”
Testing was done on 238 miles [200 miles in the flood zone, 38 miles in the non-flood zone] of roadway. Crews pulled cores and did strength tests using a falling weight deflectometer, ground penetrating radar and a dynamic cone penetrometer. Asphalt roads suffered the most, losing an average of 2 in. of strength, while composite roadways lost 1 in. and portland cement concrete roads experienced minimal strength loss.
LADOTD will submit a report to FHWA and FEMA. The FHWA will most likely conduct its own set of tests before making a determination. In the meantime, LADOTD will make repairs to roads that have already qualified for emergency relief funds.
DOT corruption did not sit well with Missouri voters, whose backlash defeated every attempt at additional funding for road and bridge work. The state, however, has turned over a new leaf, and infrastructure repair work started to flourish over the last year. In November, the Missouri Highways and Transportation Commission selected the contractor for the largest highway project in Missouri history and the first design-build project for the Missouri Department of Transportation (MoDOT). The $535 million reconstruction of I-64 in St. Louis will include the rebuilding of roads, bridges and all 12 interchanges. Gateway Construction was chosen to do the work, which is scheduled to be completed by Dec. 31, 2009.
“We are excited to get all the improvements we needed for the budget available,” said MoDOT Director Pete Rahn.
MoDOT also announced its Safe & Sound Bridge Improvement Plan in 2006, which targets 800 bridges in poor condition for improvement by 2012.
Material matters
While the construction market slowed this past year—mostly due to the decline in housing—construction activity for the road and bridge industry was quite strong in 2006, a trend that is expected to continue into 2007.
“Total dollars spent on highway and bridge construction in the first 10 months of 2006 compared to the same period of 2005 has certainly gone up strongly and I expect that to continue into 2007,” Ken Simonson, chief economist for the Associated General Contractors of America (AGC), told Roads & Bridges.
Part of the increase in construction activity can be credited to the passage of SAFETEA-LU in August 2005, which has allowed many states to begin more projects in 2006. However, Simonson predicts funding will start to run short by late 2007, a lot of which can be accounted for by the increase in gasoline prices that have led many motorists to conserve driving behaviors. With more motorists consciously using gasoline, less gas-tax money has been flowing into federal and state funds. The effect of this will start to be seen later this year.
The cost of materials in 2006 saw large increases over 2005 prices, as the year experienced price spikes early on before it leveled off with moderate decreases in October and November. “The year-over-year increase [for material costs] had gotten as high as 16% this summer when we had huge jumps in asphalt, diesel, steel and concrete,” Simonson said. “Right now, all of those are up by rather small amounts from November [2005].” Most materials experienced significant price increases this past year. As of November, concrete products were up 7.8% from November 2005, and asphalt-paving mixtures were up an astounding 28% compared with a year ago.
With asphalt prices skyrocketing, cement consumption has been up. Worldwide portland cement consumption was expected to increase 5.6% in 2006 followed by a rise of 5.5% in 2007, according to a recent forecast by the Portland Cement Association (PCA).
“We started off the year red hot, then as we went through the year it cooled,” Ed Sullivan, PCA chief economist, told Roads & Bridges. The warm weather conditions experienced in the first quarter of 2006 and the decline of housing have caused construction in the U.S. to slow this past year, according to Sullivan. However, “we are still up 1.5% compared to last year’s level, and last year was a record level,” he said.
Sullivan predicted portland cement consumption in the U.S. for 2006 to be up a little more than 1% by the end of the year, while less than a 1% gain is expected in 2007. The most dynamic markets for cement consumption in the U.S. are expected to be the South and West, as well as the South Atlantic where the rebuilding of Hurricane Katrina-hit areas is under way.
Inflation also has been a challenge contractors have had to face this past year, with its biggest impact felt on government projects.
The highway construction market has been hit the hardest by inflation, according to Simonson, because it is so dependent on materials that have seen the worst inflation increases, such as asphalt, concrete and diesel fuel. Many contractors are feeling the blow if they bid a job at a fixed price. “There has been a greater interest in the past year in having a price-adjustment clause for things like asphalt,” Simonson said, “and I think we may see more of that in the next year.”
Well equipped
Every year, the Association of Equipment Manufacturers (AEM) polls its members on expected industry-wide performance. The survey is conducted in the third quarter of the year and summarizes manufacturers’ estimates of year-end business volume for the current and following year. According to this year’s AEM outlook forecast, smaller gains are predicted in overall industry business in 2007, following expected double-digit growth in 2006.
It was expected that 2006 will close out with increases of 11.2% for overall construction equipment business in the U.S. compared with the previous year, and sales to worldwide markets for 2006 were anticipated to grow 10.9%, according to AEM.
Exports of U.S.-made construction machinery totaled $6.68 billion for the first half of 2006, which was a 10% increase when compared with the first half of 2005. Central America took delivery of 44% more American-made construction equipment during the first half of 2006 compared with 2005 by midyear. AEM also found the top three export destinations for American-made construction equipment in the first half of the year to be Canada, up 22% at $2.53 billion; Australia, up 11% at $640 million; and Mexico, up 36% at $465 million.
Looking ahead to 2007, participants of the AEM survey forecast equipment business increases of 3.9% for the U.S. and business volume to Canada is expected to increase by 5%. A growth of 6.4% in other worldwide markets is expected this coming year.
