Inflation takes toll on infrastructure projects

Various state and local officials across the US are postponing projects, downsizing others, and reprioritizing their needs.

WASHINGTON — The price of a foot of water main in Tucson, Arizona: up 19%. The cost of a ton of asphalt in a small Massachusetts town: 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 toll on infrastructure projects in the US, driving up costs so much that state and local officials are postponing projects, scaling back others, and reprioritizing their needs.

The price hikes are already taking away the value of a $1 trillion infrastructure plan President Joe Biden signed into law just seven months ago. Among other things, this law had included an approximately 25 percent increase in regular state highway program funding.

“These dollars are essentially evaporating,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. “The cost of these projects is going up 20%, up 30%, just canceling out that increase from the federal government that they were so excited about earlier this year.”

In Casper, Wyoming, the low bid to rebuild a major crossing and build a new bridge across the North Platte River this spring was $35 million — 55% higher than a state engineer’s estimate. The offer was rejected and the project delayed as state officials reassess their options.

“If this inflation continues as it is, we’re going to have to postpone 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 that the Federal Infrastructure Investment and Jobs Act would fund a boom in road and bridge construction.

“But it just won’t go as far as we had hoped,” he said.

In addition to roads, the federal Infrastructure Act envisages billions of dollars in water projects, railroads, airports, broadband internet, power grids and green energy projects in the coming years.

Inflation has battered the entire US economy and presents one of Biden’s biggest challenges during a mid-election year. Fuel, food and accommodation costs have all skyrocketed. Consumer prices rose 8.6% year over year in May, the highest rate since 1981, according to the US Department of Labor.

The prices of some key materials in infrastructure construction have increased even more. Prices paid to US producers of asphalt paving and tar mixes rose 14% year-on-year in May, according to data from the Federal Reserve Bank of St. Louis. Prices for precast steel plates used in bridges rose 23%, and ductile iron pipes and fittings – used by water systems – were almost 25% higher.

The increases are being driven by a variety of factors, including global supply chain backlogs, strong U.S. consumer and corporate spending, Russia’s invasion of Ukraine — and, some argue, federal energy and fiscal policies.

US Rep. Sam Graves, the senior minority member on the House Transportation and Infrastructure Committee, claims the infrastructure bill itself is contributing to inflation by pumping more federal money into an economy already awash with trillions of dollars in federal pandemic aid.

“They borrow more money so they can spend more money, (which) drives inflation, which cuts back on the projects they actually want to do,” said Graves, a Missouri Republican who voted against the infrastructure bill.

Senior White House adviser Mitch Landrieu said the infrastructure bill “actually positions us to reduce costs for families in the short and long term.” He pointed to American-made requirements for steel, iron and other building materials, among other things this could strengthen supply chains and thus reduce costs.

Des Moines International Airport officials were counting on federal infrastructure funds to replace an aging terminal with a modern structure. Four years ago, a new 14-gate terminal was expected to cost about $434 million and open by 2026. That spring, the cost had increased to $733 million.

That’s more than the airport can afford even with federal aid. As such, officials plan to split the project into phases and build just five new gates by 2026 at a cost of $411 million.

“If inflation continues, it could take a decade to fully complete the project,” said airport executive director Kevin Foley.

Other projects have also been rocked by inflationary price increases.

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 risen from $5.8 billion to $10.3 billion. Doubling the tunnel length was an important factor. But inflation and rising house prices also fueled the surge, forcing officials to cut costs or extend the timeframe for completing the project.

“It was challenging,” said David Couch, chief program officer for the Austin Transit Partnership.

Low bids for a series of bridge repairs along Interstate 55 in St. Louis totaled $63 million this year, 57% over budget. Overall, the cost of building freeways in Missouri for the fiscal year ended June was $139 million over budget — an 11% increase that represents a “quite significant increase” from several years under budget, Patrick McKenna said , Director of the State Department of Transportation.

Though Missouri pushed ahead with this year’s projects, inflation will “take a bite out of the future,” McKenna said.

Inflation has had immediate consequences in some places.

When bids for a road project in Lansing, Michigan, were 60% higher than estimates, the city rebid the project and cut its scope in half, said Andrew Kilpatrick, director of public services and acting city engineer.

In Huntington, Massachusetts, a 1.5-mile stretch of road will not be completed this year after a 37% increase in liquid asphalt prices pushed the cost of paving a mile to about $140,000. The city receives $159,000 annually in state funding for its roads, Highway Superintendent Charles Dazelle said.

“Right now, a mile of road is a year. That doesn’t matter,” said Dazelle.

Public water supply systems across the country are also suffering from inflation.

When Tucson, Arizona, started the first part of a four-phase water line replacement project in September 2020, a ductile iron pipe cost $75 per foot and a gate valve $3,000. By the time it was tendered for the latest phase this spring, pipe costs had risen to nearly $90 per foot and gate valves to nearly $4,100. The city is now prioritizing which other projects it can afford and which will have to wait.

“To sum it up, we’re doing less work for the same amount of money,” said Scott Schladweiler, Tucson’s chief water engineer.

The city of Tacoma, Washington, is also changing some of its planned water line renewals due to rising costs.

“Some of them are being delayed, others are being reduced in scope, and that’s forcing us to reassess some of the budgets we’ve set,” said Ali Polda, chief engineer at the city’s water board.

Residents in a neighborhood west of Little Rock, Arkansas, pay Central Arkansas Water a monthly surcharge of $146 to install new plumbing. The fee is 17% higher than originally planned due to spikes in construction costs.

Other public utilities are also having to choose between reducing the work and passing the cost on to customers, said Michael Arceneaux, acting CEO of the Association of Metropolitan Water Agencies.

“In the end, the interest payers will suffer,” he said, “because the projects have to get done and the funding has to come from the interest payers.”

Lieb reported from Jefferson City, Missouri, and Casey from Boston. Associated Press writer Josh Boak in Baltimore contributed to this report. Inflation takes toll on infrastructure projects

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