Rising construction costs demonstrate need for boosting federal highway/transit investment

News ARTBA May 06, 2005
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Soaring materials prices could push highway construction costs another eight to 12 percent higher this year, the American Road & Transportation Builders Association’s (ARTBA) top economist said recently at a Road Gang lunch in Washington, D.C.

In 2004, the cost of materials used in highway construction rose 8.5 percent, due largely to massive increases in prices for steel and diesel fuel, Dr. William Buechner, ARTBA vice president of economics & research said. By comparison, materials costs in the previous 12 years had only increased two percent annually.

This year, steel prices appear to have stabilized, but costs of other core highway materials have taken off, with aggregates rising at a 30 percent rate so far, ready-mix concrete rising 23 percent and asphalt paving mixtures increasing 11 percent, according to Buechner.

The House and Senate are now considering legislation that will determine federal highway and transit investment levels for the rest of the decade as part of the reauthorization of the Transportation Equity Act for the 21 st Century (TEA-21).

Under the six-year, $284 billion levels in the House and Senate bills, federal investment for highway construction will grow by just over one billion dollars per year through FY 2009, or about 4 percent annually. But that will just barely cover projected increases in construction costs, Buechner said, with no new funds to address the nation’s growing transportation safety and improvement needs.

The ARTBA economist said a proposed amendment to be offered next week in the Senate by Charles Grassley (R-Iowa) and Max Baucus (D-Mont.) to increase the guaranteed highway/transit levels in the reauthorization bill by as much as $10-15 billion offers the best opportunity to address rising construction costs and provide enough investment to begin tackling the nation’s growing transportation challenges.

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