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Squeeze Looms for Bridge, Road Work

Wednesday, December 8, 2010

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U.S. bridge and highway projects will contract by more than 4% in 2011, as Stimulus projects wind down and the fate of a new federal surface transportation bill remains uncertain, according to a new forecast.

The real value of highway, street and bridge construction is expected to fall to $78.5 billion next year, compared to about $82.2 billion this year, said Alison Premo Black, Vice President of Policy & Senior Economist for the American Road & Transportation Builders Association (ARTBA), which just issued its annual forecast.

State and local governments are still struggling with the economic situation in the aftermath of the recession, Black noted.

"Although state and local investment typically accounts for 57% of the value of construction work, this percentage fluctuates and the state and local market share will often decline after a recession," she said.

"States also tend to hold back on larger projects and simply maintain their programs until they know the new transportation funding levels from the federal government."

Bridge Boom

One bright spot: The amount of bridge work completed this year is expected to reach $25.4 billion, ARTBA said. The value of real work in the bridge market has nearly doubled in the last decade, as state and local governments tackle long-deteriorating conditions.

The American Recovery & Reinvestment Act (ARRA), or Stimulus law, had a positive impact on the market in 2010, Black said. The value of ARRA-related transportation projects under construction was $18 billion as of Oct. 31, according to the Federal Highway Administration. Nearly $16 billion has been paid out for construction work performed, and $6 billion in projects has been completed.

Mixed Growth

Individual state highway and bridge programs will grow next year, although unevenly, Black said. Twenty-three states increased their contract awards during federal FY 2010, which ended Sept. 30, according to an ARTBA analysis. Although some of these states have seen program declines in recent years, the increase in contract awards is one positive indicator of state-level market activity in 2011.

The model in the ARTBA forecast takes into account current economic conditions, state and local funding, and federal investment. It assumes no major increase in federal investment over the next five years. This is not to rule out an increase in the federal aid program, but it is impossible to estimate that investment level without a new highway/transit bill, Black cautioned.

The model also uses projected Highway Trust Fund outlays from the Congressional Budget Office for future federal investment. It assumes that the U.S. will return to modest economic growth of between 1.8 and 1.9% for 2011 through 2015. Increases in material prices and project costs are expected to be about 2%, in line with general inflation.

The market outlook would change if federal, state or local governments significantly increase their investment levels, ARTBA said.

Other Modes

The outlook for other modes in the ARTBA forecast:

Airports:  The real value of work done on airport runways is expected to fall by 10% to $5.3 billion, driven by flat funding for the Airport Improvement Program and the lack of a  new aviation reauthorization program. The airport runway market also benefited from increased ARRA-related spending in 2009 and 2010.

Rail & Transit: The real value of transit and rail work is expected to drop slightly to $14.9 billion in 2011, from $15.3 billion in 2010. The longer-term outlook will depend on federal investment through the New Starts program, private rail investment, and the general state of the U.S. economy, Black says.

Established in 1902, ARTBA represents more than 5,000 public- and private-sector members of the U.S. transportation design and construction industry.

‘Political Inertia’ Blasted

Continued congressional inaction on a multi-year highway/transit investment bill will likely mean further job losses in the coming months, ARTBA president & CEO Pete Ruane has warned.

Pete Ruane

"Political inertia at both ends of Pennsylvania Avenue is wreaking havoc with the construction industry and the nation's transportation improvements programs," Ruane said after November’s employment report showed continued job losses in the construction industry. The industry’s 18.8% unemployment rate is about twice the national average

The current surface transportation law, known as SAFETEA-LU, lapsed Oct. 1, 2009. The program’s fourth extension is set to expire Dec. 31.

"Since job creation is our top goal, let's actually try to create jobs," Ruane says. "Our message to the President and Congress is simple: Do your job and help put America back to work by making passage of a multi-year, robustly financed transportation infrastructure bill a top-tier priority in early 2011."

   

Tagged categories: American Recovery and Reinvestment Act; Bridges; Economic stimulus; Economy; Government; Infrastructure; Roads/Highways

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