Inflation weighs on new infrastructure projects
The price of a foot of water pipe in Tucson, Arizona: up 19%. The cost of a ton of asphalt in a small town in Massachusetts: up 37%. The estimate for the construction of a new airport terminal in Des Moines, Iowa: 69% higher, with a delay of several years.
Inflation is taking a heavy toll on infrastructure projects across the United States, driving up costs so much that state and local authorities are postponing projects, cutting others and redefining their needs.
Price hikes are already diminishing the value of a $1 trillion infrastructure plan that President Joe Biden signed into law just seven months ago. This law provided, among other things, an increase of approximately 25% in funding for regular highway programs for the states.
“Those dollars basically evaporate,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The cost of these projects is going up 20%, 30%, and just erasing that increase from the federal government that they were so excited about earlier in the year. »
In Casper, Wyoming, the low bid to rebuild a major intersection and build a new bridge over the North Platte River came in at $35 million this spring, 55% higher than an engineer’s estimate of State. The offer was rejected and the project delayed as state officials reevaluate their options.
“If this inflation continues as it is, we will have to move projects from one year to the next, to the next, to the next,” said Mark Gillett, chief engineer for the Wyoming Department of Transportation.
Gillett had hoped the federal Infrastructure Investment and Jobs Act would fund a boom in highway and bridge building.
“But it won’t go as far as we had hoped,” he said.
In addition to roads, the federal infrastructure bill includes billions of dollars for water projects, railroads, airports, broadband internet, power grids and energy projects green over the next few years.
Inflation has affected the entire US economy, posing one of Biden’s biggest challenges in a midterm election year. Fuel, food and housing costs all skyrocketed. Consumer prices jumped 8.6% in May from a year ago, the highest rate since 1981, according to the US Department of Labor.
The prices of some key materials in infrastructure construction have increased further. Prices paid to U.S. manufacturers of asphalt pavement and tar mixes rose 14% in May from a year ago, according to data from the Federal Reserve Bank of St. Louis. Prices for fabricated steel plate, used in bridges, rose 23%, and ductile iron pipe and fittings – used in waterworks – rose nearly 25%.
The increases are driven by a variety of factors, including global supply chain backlogs, strong consumer and business spending in the United States, Russia’s invasion of Ukraine – and, some say, political federal authorities on energy and taxation.
U.S. Representative Sam Graves, a senior minority member of the House Transportation and Infrastructure Committee, argues that the Infrastructure Act itself contributes to inflation by pouring more federal money into an already wealthy economy. billions of dollars in federal pandemic aid.
“They’re borrowing more money so they can spend more money, (which) fuels inflation, which cuts into the projects they actually want to do,” said Graves, a Republican from Missouri who voted against the infrastructure bill.
Senior White House adviser Mitch Landrieu said the infrastructure act “actually positions us to reduce costs for families in the short and long term.” He pointed out, among other things, the US requirements for steel, iron and other building materials. which could strengthen supply chains and therefore reduce costs.
Officials at Des Moines International Airport were counting on federal infrastructure money to replace an aging terminal with a modern structure. Four years ago, a new 14-gate terminal was expected to cost around $434 million and be open by 2026. By this spring, the cost had jumped to $733 million.
That’s more than the airport can afford, even with federal assistance. Officials therefore plan to divide the project into phases, building just five new gates by 2026 at a cost of $411 million.
“If inflation continues, it could be a decade before the project is fully completed,” said airport executive director Kevin Foley.
Other projects have also been rocked by inflationary price hikes.
Since voters approved a property tax increase in 2020, the estimated cost of building two light rail lines and a tunnel through Austin, Texas, has fallen from $5.8 billion to $10 billion. .3 billion. Doubling the length of the tunnel was an important factor. But inflation and soaring house prices also fueled the rise, forcing officials to consider cutting costs or extending the timeline for the project.
“It’s been a challenge,” said David Couch, program director at the Austin Transit Partnership.
Low bids for a series of bridge repairs along Interstate 55 in St. Louis totaled $63 million this year, 57% more than budgeted. Overall, Missouri freeway construction costs for the fiscal year ending June were $139 million above budget — an 11% increase that marked a “pretty big jump” from several years under-budgeted, said state Department of Transportation Director Patrick McKenna.
Although Missouri has moved forward with plans this year, inflation will “take a bite out of the future,” McKenna said.
Inflation had more immediate consequences in some places.
When bids for a road project in Lansing, Michigan, exceeded estimates by 60%, the city re-bid for the project and cut its scope in half, said Andrew Kilpatrick, director of public service and Acting City Engineer.
In Huntington, Massachusetts, a 1.5-mile stretch of road will not be completed this year after a 37% rise in the price of liquid asphalt raised the cost of paving a mile to about $140 $000. The city receives $159,000 a year in public funding for its roads, said Highways Superintendent Charles Dazelle.
“Right now, a mile of road is a year. It doesn’t do anything else,” Dazelle said.
Public water supply systems across the country are also strained by inflation.
When Tucson, Arizona launched the first part of a four-phase water main replacement project in September 2020, a ductile iron pipe cost $75 per foot and a gate valve cost $3,000. When the most recent phase was submitted this spring, pipe costs had risen to nearly $90 per foot and gate valves to nearly $4,100. The city is now prioritizing other projects it can afford and those that have to wait.
“The bottom line is, we’re doing less work for the same amount of money,” Tucson chief water engineer Scott Schladweiler said.
The city of Tacoma, Washington is also changing some of its planned water main replacements due to rising costs.
“Some of them are delayed, some of them are reduced, and that forces us to re-evaluate some of the budgets that we have established,” said Ali Polda, chief engineer of the city’s water department.
Residents of a neighborhood west of Little Rock, Arkansas, will pay a monthly surcharge of $146 to Central Arkansas Water to install new water pipes. The load is 17% higher than originally planned due to construction cost spikes.
Other utilities will also have to choose between reducing work and passing costs on to customers, said Michael Arceneaux, acting CEO of the Association of Metropolitan Water Agencies.
“Ultimately it will be the taxpayers who will suffer,” he said, “because the projects have to get done and the funding will have to come from the taxpayers.”
Lieb reported from Jefferson City, Missouri, and Casey from Boston. Associated Press writer Josh Boak in Baltimore contributed to this report.