Transportation Outlook: Down to a Crawl

Bill Wilson | January 18, 2011

New faces in Congress are raising an eyebrow or two in the road and bridge industry. With the balance of power finding more of a middle ground following the Republican’s strong showing in the Nov. 2 elections, many in the transportation sector are now skeptical that a new six-year highway-funding bill will surface any time soon.

Feeding the pessimism is a new pledge taken by Republicans and Democrats that calls for no tax increases. With the Highway Trust Fund weakening, and the prospects of increasing the federal gas tax dim, the question remains as to how to fund future road and bridge work across the country—and the uncertainty has flattened prospects in the transportation market heading into 2011.

Still in recovery
According to a recent Roads & Bridges survey, which polled contractors, government officials and engineers in the industry, a resounding 92 percent said the next year will generate either fair or poor results, and 87 percent, when asked to describe the current economic conditions (in terms of money generated for road and bridge construction) in their state, had similar feelings.

“I do not see that 2011 is going to be any different than what we saw in 2010,” said Peter Rahn, CEO of HNTB Corp., a transportation engineering firm headquartered in Kansas City, Mo. “I don’t see the activities out there that signal a recovery.”

There isn’t a clear signal as to when economic conditions will improve, either. When Roads & Bridges readers that ranked 2011 fair or poor were asked when they expect to see a revival, 33 percent said it will come in 2013, 28 percent went with 2012, and 19 percent indicated it would not come until 2014.

Republicans and Democrats in Washington could help validate any one of those recovery numbers with the passage of the next long-term highway bill. The last extension of SAFETEA-LU expired on Dec. 18, and at press time incoming chairman of the House Transportation and Infrastructure Committee, John Mica (R-Fla.), as well as Sen. Barbara Boxer (D-Calif.), who oversees the Environment and Public Works Committee on the Senate side, were both pushing for a six-month extension.

Mica has been voicing his opposition to raising the federal gas tax for months, and could center the House bill on public-private partnerships and the formation of a National Infrastructure Bank.

In a last-ditch effort to keep the possibility of raising the federal gas tax alive, Sens. Tom Carper (D-Del.) and George Voinovich (R-Ohio) submitted a letter to the National Commission on Fiscal Responsibility and Reform in November proposing a 25-cent-per-gallon spike.

A portion of the increase (15 cents a gallon) would be linked to the Highway Trust Fund, with the remaining sum going toward deficit reduction. The move, however, was lacking support.

Some states will see a minor increase in funding following strong public support at the polls on Nov. 2. In total, approved ballot measures aimed at improving transportation infrastructure are expected to generate $376 million in new revenue. The American Road & Transportation Builders Association tracked 27 state and local transportation-related ballot initiatives in 16 states, of which 13 called for increased funding through bonding, transfers or new tax revenues. Eight of those 13, or 61 percent, were approved. Money generated from the ballot may be the prime source of funding for some states in the short term. When Roads & Bridges readers were asked if their state had taken any action to increase revenue into its highway construction fund, an overwhelming 72 percent said no. However, when states did take measures to generate more for transportation infrastructure, it was usually in the form of a raise in the gas tax or some other fee (28 percent).

Hard costs
High-speed rail is the one area in the transportation industry that could see decent activity in the coming months due to a strong financial backing from the federal government. In early November, Transportation Secretary Ray LaHood announced another $2.4 billion had been given to 54 high-speed rail projects across the country. However, the remaining segments—highway, airport, transit, bridges—could experience declines with the absence of American Roads & Reinvestment Act dollars, which provided some relief in 2009 and 2010.

The cost to do business, however, could be on the rise in 2011. Roads & Bridges readers indicated that material costs will either stay the same (50 percent) or be higher (47 percent) in the coming months. Asphalt (21 percent) leads the list of materials susceptible to price hikes as indicated by those who took the survey, followed by steel (18 percent), cement (17 percent), pavement markings (16 percent), rebar (15 percent) and aggregate (13 percent).

Diesel fuel also is expected to continue to hamper budgets. According to the Associated General Contractors of America, diesel fuel has gone up a staggering 20 percent since October 2009. Ken Simonson, the association’s chief economist who tracks the costs, also said that competition for road and bridge jobs will continue to keep bid prices low in 2011, and that material prices could spike in multiple segments later in the year as the U.S. and foreign economies gradually recover.

Bill Wilson is editorial director for Roads & Bridges
magazine, a sibling publication of Construction