Bumpy forecast for highway and bridge construction
After three years of steady but modest growth, the U.S. highway and bridge construction market is expected to flatten in 2009, as recent increases in federal highway investment likely will be offset by weakened state and local highway budgets, according to a forecast issued by the American Road & Transportation Builders Association (ARTBA).
Dr. William Buechner, ARTBA vice president of economics and research, projects that the value of construction work put in place on highways and bridges will be $80.2 billion in 2009, a 1.5 percent increase over 2008’s $79 billion.
If construction material costs level off next year – as seems likely following the recent collapse of oil prices and the nation’s economic slowdown – the real volume of construction work should stabilize, and may even improve, after declining about 6 percent in 2008, according to ARTBA.
One factor that could considerably brighten the forecast, Buechner noted, is for Congress and the president to enact an economic stimulus bill that includes transportation investment. Every $1 billion invested in quick-start highway and bridge projects would add about one percentage point to the 2009 forecast.
Even without a stimulus bill, the federal highway program should provide a cushion for highway construction in 2009. The $41.2 billion of highway investment enacted by Congress for fiscal year 2008 – a 5.5 percent increase over fiscal year 2007 – will have its biggest impact during the 2009 construction season as projects started in 2008 ramp up. Another $41.2 billion in the federal highway budget for fiscal year 2009 will help maintain market stability.
“The most critical problem for the highway construction market in 2009 is that state and local governments are facing serious fiscal problems, and some may tap transportation funds or defer transportation investments to meet budgets,” Buechner said. “High gas prices this past summer, combined with a slowing economy, have resulted in a 3.3 percent decline in highway miles driven – thus reducing state gas-tax revenue collections.”
Buechner noted that slow sales of new cars and trucks have caused a drop in revenues from vehicle registration fees; both (vehicle sales and registration-fee revenues) will impact highway investment.
On the subject of registration fees, some budget-strapped states are contemplating hiking them. Ohio drivers, for instance, will face a variety of fee increases when they go to their local motor vehicle office to register a vehicle. Among the fees that will increase as outlined in Gov. Ted Strickland’s proposed budget are registering a motorcycle or passenger car, charges for temporary tags and ordering someone’s driving history.
At the same time, foreclosures and a decline in home values in many areas of the country are cutting into the property-tax revenues that many local governments apply to their highway construction activities.
Bond turmoil could lead to state cutbacks
The recent turmoil in financial markets may affect the ability of some state and local governments to use bond financing for transportation projects, which typically provides about 5 to 10 percent of project funding each year. Bond markets were inoperative in September, and interest rates on tax-exempt bonds soared. Since then, rates have eased, but are still above last year’s level, which may temporarily affect plans to issue transportation-related bonds.
According to the ARTBA forecast, some states already have announced cutbacks in highway and bridge projects in response to budget shortfalls. Maryland will delay at least $1.1 billion of scheduled highway construction projects during the next six years. North Carolina anticipates having to cut $200 million from its highway program by June. New York State plans to eliminate 10 percent of its projects because of budget difficulties. Other state and local governments are making similar adjustments to the revenue shortfall.
Nationwide, the impact is showing up in new contracts awarded for highway and bridge construction projects, which were down $1.7 billion, or 3.7 percent, through November 2008.
Reauthorization of the federal highway and transit programs before Sept. 30 – the earlier in the year the better – also has market implications, according to ARTBA, since lack of clarity on future federal funding beyond that date could cause some state and local highway agencies to go slow in committing federal funds for new projects.
Bright spots include public transit
Looking on the bright side, several transportation tax issues got the thumbs up in elections this past November. Voters in Alaska, California and Rhode Island approved new bond issues for transportation improvements, as did voters in various counties in Colorado, North Carolina, Oregon, Texas and Virginia.
Public transit is one transportation mode that showed growth last year, ARTBA reported. The value of construction work on subway and light-rail projects hit $4.3 billion in 2008, up 20 percent from $3.6 billion in 2007. The growth should continue into 2009 and beyond, driven in part by $1.5 billion of contracts awarded late last year for New York’s 2nd Avenue subway line, according to Buechner.
Big contract awards in 2008 and 2007 for projects in Colorado, Oregon, Nevada and Utah also should help boost the transit construction market for the next few years.
Spend infrastructure dollars carefully
Pete Ruane, president and CEO of ARTBA, told GovPro.com that the infrastructure stimulus package needs to be well-planned.
“While investing in highway and transit projects is a road to economic recovery, and should be a key part of any stimulus package, simply throwing transportation dollars at the current crisis – unless done right – would be a critical mistake,” Ruane said. “Every transportation dollar included in the stimulus package should be subjected to a strict review process by both the Government Accountability Office (GAO) and U.S. Department of Transportation inspector general. This will ensure timely, independent review and appropriate utilization. These safeguards will ensure transparency and demonstrate social utility. And, most importantly, the inclusion of these measures will ensure that funds go to needed projects that will put thousands of employees on job sites nationwide helping to build a modern, efficient transportation infrastructure network.”
Washington, D.C.-based ARTBA represents more than 5,000 public- and private-sector members of the U.S. transportation design and construction industry before Congress, the White House, federal agencies, news media and the general public.
