The crystal ball is hazier than ever these days, so economists can do little more than predict modest increases in highway spending during the next one to two fiscal years. For one thing, Congress hasn’t even considered deliberating President Trump’s proposed $1.5 trillion infrastructure spending program, unveiled this spring to a typical mix of optimism and doubt.
Two more strikes against the plan: It neglects to identify a way for the federal government to pay its $200 billion portion or address the impending collapse of the Highway Trust Fund.
“The presumption is that no package will be forthcoming in the near term,” says Anirban Basu, chairman and CEO of Baltimore-based Sage Policy Group and chief economist of Associated Builders and Contractors. “This is made even more likely by the Congressional Budget Office’s prediction that the federal government will soon be running a $1 trillion per annum budget deficit.”
Nonetheless, the American Society of Civil Engineers says the plan is a good start. In a press release, ASCE President Kristina Swallow says, “Now, it’s time for Congress to develop a bill that can pass with bipartisan support. This bill should increase federal investment, including a long-term, sustainable fix to the Highway Trust Fund.”
The Trust Fund receives money from the federal fuel tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon of diesel fuel, but could soon become insolvent without a tax increase or additional funding mechanism.
The Trump plan, meant to energize investment by state and local governments, offers a variety of programs to generate revenue, such as incentives for reducing timelines and improving performance, providing federal funds for infrastructure investments for populations below 50,000, and funding high-risk, high-reward infrastructure projects. It also encourages construction training opportunities.
Regional Differences
Basu says most of the recent increases in highway spending have been at the state level. “Texas has an incredibly diversified economy. From an economic development perspective, it could scarcely be doing any better,” he says.
Further fueling the state’s prospects, Texas voters approved Proposition 1 in 2014 to provide $1.7 billion in funding per year; and Proposition 7 in 2015 to provide as much as $2.5 billion in funding per year if thresholds for sales and use tax revenues are reached.
Other states have similarly stellar reputations for managing their highway programs, and money generated in the expanding technology sectors—such as Washington, Oregon, Idaho and Minnesota—are leading to more investment. Recently, Dodge Construction Outlook predicted that highway and bridge construction would rise 5 percent to $64.8 billion through 2018, helped primarily by greater funding from state and local bond measures.
Transit-related measures for roads and bridges have passed in recent years in Los Angeles, Seattle, Santa Clara, Calif., San Francisco, and Charleston, S.C.
Elsewhere, a $720 million bond for roads and transit projects passed in Austin, Texas, a $100 million bond for roads and bridges passed in Maine, and New Jersey passed a constitutional amendment that dedicated its gas tax receipts to transportation projects.
And this spring, state lawmakers in Colorado announced a deal to spend up to $3 billion on transportation projects during the next 20 years. If approved, it would represent the largest transportation funding measure in the state’s history.
Greg Smith, vice president of Shirley Contracting Co. LLC in Lorton, Va., says Virginia has an acceptable pipeline of projects, largely because of a gas tax increase there in 2015 and ongoing demand to lessen traffic congestion.
“They’ve done some good things here with regional sales and use taxes that are earmarked for transportation,” he adds. “Maryland is also starting to get its act together. They’ve got a pretty comprehensive plan that they are looking to expand.”
Other areas have a decidedly different situation. Commodity-intensive oil and gas states such as Louisiana and Alaska have not fared nearly as well due to low oil prices during the last three years. Basu says there’s no question that the condition of a state’s infrastructure largely depends on its economy, and that passing a gas tax increase is nearly impossible when people don’t have money in their pockets.
Jim Meads, president and CEO of Sain Associates Inc., an engineering firm in Birmingham, Ala., is concerned about the Trump plan’s emphasis on local funding, since Alabama and other states such as Louisiana and Mississippi have yet to pass state gas tax increases.
“We’re struggling,” Meads says. “How successful would we be at running a business if we didn’t increase our revenue for 20 years? Here in Alabama we’re really hurting; it’s affecting the economy.”
The Alliance for Alabama’s Infrastructure, a collaboration of various industry groups, is working toward a solution, although change is unlikely this year.
Karen Say-Valadez, president and CEO of Saybr Contractors Inc. in Tacoma, Wash., says her state has been largely immune to infrastructure woes thanks to an expanding technology sector, but she’d still like to see more stability in the cycle.
“We call it the year-end project dump,” Say-Valadez says. “As federal and state agencies have to spend the money or lose it, they start flooding the market with projects. Had that work been doled out over an entire year, they would get better value on pricing. As a taxpayer, that’s frustrating, but as a contractor, that would also help stabilize our workflow.”
During the last few months, she has noticed an increase in competition in the Seattle area as contractors from neighboring states are attracted to the area’s booming economy.
Less Federal Red Tape, More Skilled Workers
A streamlined permitting process could help level off the project cycle, and some construction groups are pushing for significant changes—particularly with regard to environmental permitting—to get projects to the field faster.
Given the Trump administration’s penchant for streamlining processes in other areas, they’re hopeful that change could be coming soon.
As it stands now, an environmental review through the National Environmental Policy Act can take 1,600 days, and permitting another 800. Environmental Protection Agency Administrator Scott Pruitt is considering recommendations to simplify the process.
Another drag on heavy/highway projects, no matter the location, is the worsening skilled labor shortage. This is especially troublesome in areas where work is plentiful. In Virginia, Smith and various industry associations worked with a local community college to develop equipment operator training programs. The college also secured grants to purchase equipment simulators. He says the current shortage runs the gamut from skilled laborers to equipment operators to supervisors.
“It affects our ability to take more work and impacts the industry in our region.”
The shortage goes far deeper than demand outpacing supply. “It’s more of a cultural thing,” Smith adds. “Everyone has it ingrained in them that they have to go to a four-year college and get a four-year degree. What they don’t realize is that our industry provides a tremendous opportunity for on-the-job and vocational training.”
Bolaji Kukoyi, president of Dynamic Civil Solutions, an engineering firm in Birmingham, Ala., says engineering shortages have become a challenge. “It slows us down, but we just keep rocking and rolling until we find the right person,” Kukoyi says. “We don’t rush to make any hires, so we just carry some extra load until we find the right fit.”
In proactive fashion, his company offers minority-oriented scholarships in engineering at the University of Alabama at Birmingham, his alma mater.
In the Seattle area, Say-Valadez says she’s competing with other high-paying jobs offered by Boeing, Microsoft and Amazon. The shortage is particularly impactful at Saybr, given its recent growth and expansion into four divisions.
“We’ve had to turn down work because we didn’t have the staffing to manage it,” she adds. “That is extremely painful to me, having fought for 20 years to build the business and wanting to expand.”
As a female in the male-dominated world of construction, Say-Valadez works through the ABC Western Washington Chapter’s Diversity Committee to recruit women and minorities. Saybr also looks for new hires through “Work of Honor,” a program that transitions veterans from military to civilian life.
“It’s a good segue for us to find the people who we think would be a good fit,” Say-Valadez says. “We have a very strong culture at our company and, skills or not, if you don’t fit into our culture then you’re not going to be here long term.”
Technological Fix
As a potential panacea to workforce woes, heavy/highway contractors and engineers are turning to technology to reduce costs and improve efficiency.
Smith is most excited about the potential of GPS-enabled machine controls in conjunction with 3D modeling in his earthmoving equipment. Shirley Contracting—with about 400 excavators, loaders, dozers, off-road trucks and rolling stock at its Virginia facility—recently has made significant investments in the technology.
He also would like to begin using unmanned aerial vehicles in conjunction with 3D topological software for estimating workload, time and equipment needs.
“I think everyone sees the advantages of being able to fly over a site in a few minutes and see what you’ve got to move in terms of material, compared to the hours it would take with individuals walking the site,” Smith says.
Say-Valadez uses a software program that enables workers in the field to remotely upload photographs, data reports and time cards, thereby eliminating road hours and improving efficiency.
“We have horrible traffic here in the Seattle area. Anything we can do to limit the time that folks are on the road makes us more cost competitive.”
Kukoyi leans heavily on 3D modeling in his highway designs, saying the technology is catching up with other design applications. “It helps us minimize a lot of errors in the design process and leads to a more successful project,” he says. “You can easily see where your conflict points are, and identify them in the design process versus out in the field. It saves everything: time, money and headaches.”
Highway designs themselves are adapting to a changing technological world. Meads says there has been some movement at the state level to develop road systems that can support autonomous/semi- autonomous vehicles.
Through its Transportation System Management and Operations program, the Alabama Department of Transportation is considering the installation of traffic signal controllers that can accommodate the next wave of autonomous and connected vehicles. TSM&O is an integrated program to optimize the performance of existing multimodal infrastructure through the implementation of systems and services.
“There’s a lot of planning and research as they try to figure out how we need to accommodate autonomous vehicles in our design,” Meads says. “How does that affect signage, markings and those types of things?”
