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California Construction Forecast 2007

California's highway/infrastructure construction outlook for 2007 and beyond looks the best it has in decades. Governor Schwarzenegger can be thanked for injecting life into the whole transportation issue by setting in motion his aggressive 10-year California Strategic Growth Plan (SGP) last year. The SGP aims at spending $222 billion to strengthen transportation systems, waterways, and boost h...

January 01, 2007

California's highway/infrastructure construction outlook for 2007 and beyond looks the best it has in decades. Governor Schwarzenegger can be thanked for injecting life into the whole transportation issue by setting in motion his aggressive 10-year California Strategic Growth Plan (SGP) last year. The SGP aims at spending $222 billion to strengthen transportation systems, waterways, and boost housing and education. $107 billion is dedicated strictly to transportation issues. Voter approved bond measures will add additional billions of dollars to transportation and infrastructure.

The SGP and bond measures arrived not a moment to soon, as the American Society of Civil Engineers (ASCE) has given California a dismal D+ rating for its transportation system. Even with seismic upgrading and maintenance current roads can't keep pace with increased traffic. California's infrastructure didn't fare much better. ASCE gave the system a C-. It said the state would need nearly $18 billion each year just to bring its transportation infrastructure to a grade of "B."

Will Kempton, Caltrans (California's Dept. of Transportation) director, summarizes the transportation portion of SGP as targeting "a significant decrease in traffic congestion below today's levels."

If current trends continue, traffic delays of 558,143-plus hours each day in 2006 will jump to 753,000 hours in 2016. But with SGP in progress, those delays will shrink some 100,000 hours below today's levels, even though traffic will have increased by 15 percent.

In addition to congestion relief, the $107-billion investment also results in:

  • 550 new HOV lane miles
  • 750 new highway lane miles
  • 9,000 lane miles rehabilitated
  • 15-percent increase in throughput
  • 600 miles new commuter lines
  • 310,000 more transit ridership
  • 11 more intercity rail round trips
  • 150-percent increase in intercity rail ridership
  • 8,500 miles of separated bike and pedestrian paths

New Budget

The bi-partisan handily approved 2006-07 State Budget provides some $5.2 billion for transportation. In addition, the Legislative Analyst's Office notes that $1.5 billion is set aside as capital outlay support, plus $2.2 billion for local assistance (federal pass-through funds to locals for contracting). $1.1 billion will be for highway operations and maintenance. The 2007 budget fully funds Proposition 42 for the second year in a row — an additional $1.4 billion dedicated to transportation projects only.

However, Kempton said to achieve the 10-year funding goals for SGP, reforms are needed, including:

  • Enabling public-private partnerships to bring in private capital to fund infrastructure projects
  • Protect Proposition 42 (the sales tax on gasoline) for transportation projects only (passage of Prop 1A in November has ensured this).
  • Use design-build contracting and design-sequencing to deliver transportation projects more efficiently and quickly.

Bond Help

Five major bond issues concerning the construction industry in California were on November's ballot. All were expected to pass, but there was some surprise at how large a margin they were approved of by voters. The state will be in fairly good shape for the near future, but others caution that the state's debt load is going to get top heavy again. The bond measures:

Proposition 1A — Closed the loophole in Proposition 42, ensuring that gas tax revenues are used to pay only for transportation projects, not other programs. Passed by 76.6 percent

Proposition 1B — The Highway Safety, Traffic Reduction, Air Quality and Port Security Bond Act. Provides $19.9 billion to make safety improvement on highways, widen roads, reduce congestion, improve public transit, and improve anti-terrorism security at California ports. Passed by 61.3 percent

Proposition 1C — The Housing and Emergency Shelter Trust Fund Act. Provides $2.9 billion for shelters for battered women, safe housing for low-income senior citizens. Passed by 57.5 percent

Proposition 1D — The Kindergarten-University Public Education Facilities Bond Act. Provides $10.4 billion to build and modernize K-12 classrooms and expand the state's universities and community colleges. Passed by 56.6 percent

Proposition 1E — The Disaster Preparedness and Flood Prevention Bond Act. Earmarks $4.1 billion to repair levees and improve flood protection throughout the state. Passed by 64 percent

Construction Outlook

Total heavy civil and building construction for 2007 continues to look good as figures chart indicate. Burbank-headquartered Construction Industry Research Board (CIRB) says that, "non-residential building is up in all regions with double-digit gains in Southern California, the Bay Region and Central Coast."

Hawaii

"Hawaii's construction cycle is at a turning point," according to the University of Hawaii Economic Research Organization's 2007 forecast. Residential construction is slowing, but new commercial and retail will remain strong. Total construction (including residential) will drop from $6.2 billion in 2006 to $6.1 billion next year.

More Forward Thinking

Amid all the hoopla surrounding the 50th anniversary of the Interstate Highway System, Transportation California had an excellent take on the important role California has played in the system, as well as a warning of where we are headed if long-term population growth patterns and infrastructure needs are not heeded. It said:

(In 2006) California's ultimate baby boomer, the Interstate Highway System, turned 50.

For the last five decades, California's Interstate Highway System has been the most critical link in the state's transportation network, saving Californians $99.3 billion annually — $2,766 per person — in safety benefits, saved time, reduced fuel, and lower consumer costs, according to a report released in 2006 by TRIP, a national nonprofit transportation research group.

Enhanced safety is a major benefit of the Interstate Highway System, which was engineered to make travel safer. The report, "Saving Lives, Time and Money," found that the interstate system has saved 25,000 lives in California since 1956 and an average of 550 lives per year over the last 10 years. The annual savings in reduced health care costs and other costs associated with lost productivity to traffic crashes total $3.16 billion statewide — $88 per person.

But the benefits are now eroding because California has been unable to keep up with the extreme wear and tear and growing traffic congestion on its complex system of interstate routes and other highways. Travel is increasing at a rate five times faster than interstate capacity has been added. Today, 75 percent of California's urban interstates are considered congested.

"The interstate highways, like a lot of Californians born after World War II, are facing a number of health problems that need to be addressed — sooner rather than later," said Doug Aadland, chairman of Transportation California.

But with population, annual miles traveled and commerce continuing to grow, California's budgets have been stressed to maintain the system of 2,458 miles and 3,761 bridges: 38 percent of state interstate highways are rated in poor or mediocre condition, and a quarter of the state's bridges are rated deficient. California has the fifth-greatest percentages of deficient bridges in the country.

Is a transportation angioplasty in California's future?

"The TRIP report gives an indication of how much we stand to lose in time, dollars and opportunity if we don't get people moving on the system again," Aadland said. "Not addressing the chronic problems of limited capacity and system deterioration will have serious consequences to our economic health."

Although the new state budget commits significantly more dollars to transportation this coming year, the state faces more than $100 billion in unfunded transportation needs over the next 20 years. Existing funding does not meet current needs. The cost of maintenance and rehabilitation on the aging system is so great it consumes all the revenue from the federal and state gasoline taxes.

System improvements are now funded by Proposition 42, the sales tax on gasoline which voters overwhelmingly approved in 2002. Although Proposition 42 is fully funded this year, and will be next year, the funds were withheld in past years because of the state's fiscal crisis.

"California needs to fix Proposition 42 and secure that money for transportation," Aadland said. "The state urgently needs additional funds to catch up on all the years we didn't have the money to spend on transportation. That pattern of under-funding is ruining our 50-year investment in mobility," Aadland said.

"This November, California voters (had) the opportunity to change the state's spending patterns and make a down payment on the future," he said. Proposition 1-A will fix the loophole in Proposition 42, and Proposition 1-B will authorize $19.9 billion in bonds for transportation programs.

Misc. Civil Other Civil Roads/Highways Total Civil Buildings Total
2003 2,354,304,252 5,460,073,453 2,935,599,598 10,749,977,303 19,112,591,771 29,862,569,074
2004 2,274,240,889 4,864,641,973 2,139,893,318 9,278,776,180 21,937,949,136 31,216,725,316
2005 1,954,403,547 5,814,084,811 2,647,338,072 10,415,826,430 22,754,297,813 33,170,124,243
2006 1,976,902,887 4,516,877,089 3,119,433,045 9,613,213,021 21,502,309,314 31,115,522,335
2007 2,018,093,620 4,367,723,022 3,323,922,221 9,709,738,863 20,210,860,576 29,920,599,439

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