Transportation Construction Climbs With Help from ARRA Funding
In its newest report, Transportation Infrastructure: Gearing Up for Change, McGraw-Hill Construction’s Research and Analytics takes a look at the current state of the nation’s transportation infrastructure and its prospects for the future—particularly given the recent investment made with the 2009 American Recovery and Reinvestment Act.
Unfortunately, much more needs to be done to build and maintain the transportation infrastructure that is so critical to national competitiveness and American way of life, the report states. However, the substantial allocation for transportation in the ARRA, combined with the rapid obligation of ARRA transportation funding, will yield a strong market in the near term that will grow by 25% over 2008 levels.
According to McGraw-Hill Construction, construction starts for surface transportation infrastructure totaled $64.0 billion in 2008. Of this total, roughly 61% of starts were for street construction, 22% for bridges, and 8% for runways, taxiways and rail beds. Another 9% of transportation starts were for buildings associated with this infrastructure, including passenger terminals, freight terminals and service facilities. Regrettably, the need greatly exceeds current levels of investment. The National Surface Transportation Policy and Revenue Commission, which was created as part of the current federal surface transportation bill (SAFETEA-LU), states that the U.S. needs to invest well over $200 billion annually for the next 50 years to achieve a state of good repair for existing systems and to create more advanced systems that will encourage future economic growth.
One much-needed step to rectify this situation came with the 2009 American Recovery and Reinvestment Act. The ARRA was passed not only to create jobs and provide short-term economic benefits, but to improve the nation’s deteriorating infrastructure. It therefore provides $48.1 billion for investment in transportation infrastructure, facilities and equipment—over two-thirds of the U.S. Department of Transportation’s entire annual budget for fiscal year 2009. Of these funds, $38.6 billion is directed through existing programs with $27.5 billion allocated for infrastructure spending on highways and bridges, $8.4 billion for public transit, and $1.3 billion each for Amtrak and airports. New transportation programs funded by the ARRA include $8 billion for intercity high-speed rail and $1.5 billion for surface transportation discretionary (TIGER) grants.
While critics have argued that much of the ARRA funding has been slow to work its way down to the state and local level, this is not the case with transportation funding. The U.S. DOT has moved quickly to approve funds for roads, bridges, transit systems and airport projects. A six-month review shows that by the end of August, $28.3 billion of transportation stimulus funds had been obligated for over 7,500 projects. This is more than half of the total funding for transportation programs and nearly three-quarters of available funds (excluding special discretionary funding).
The Federal Highway Administration reports that it had allocated $18.4 billion or 67% percent of its ARRA funding on over 7,100 projects and construction had begun on almost half of those projects. The Federal Transit Administration had awarded nearly 90% of available funds for over 660 grants totaling $7.3 billion, far more than the 50% required by September 1, 2009. Finally, Amtrak had allocated all of its funds, and construction had begun on over 80% of projects. Furthermore, states reported that bids were coming in 5% to 30% below estimated costs, enabling them to fund additional projects. The lower bids reflect intense competition for contract awards, given that so many contractors are out of work.
As a result, McGraw-Hill Construction estimates that over the next two years, construction starts for transportation infrastructure will jump from $64 billion in 2008 to a total of $80 billion by 2010, an increase of 25% over the two years. The strongest gains will come from highways and bridges, expected to grow from $53 billion in 2008 to $67 billion in 2010, an increase of 27%. At the same time, runways, railways and taxiways will advance 12% over the two years to a total of $5.6 billion, while transportation buildings will increase 22% over the period to $7.5 billion in 2010.
Surface transportation is at a crossroads: changes in vehicle technology, international politics, environmental affairs, and energy economics are converging precisely when the Obama Administration is trying to set surface transportation on a path that is more efficient, more environmentally friendly, and more financially sustainable, the report states. It’s a win-win situation not just for the Administration and transportation contractors, but for the American people as well.
For more information about McGraw-Hill Construction’s exclusive report, Transportation Infrastructure: Gearing Up for Change, contact your McGraw-Hill sales representative or visit www.construction.com for information on all of McGraw-Hill Construction’s market research and intelligence.