With hopes for a COVID-19 recovery in 2021, regional firms and engineers are eyeing opportunities for infrastructure to play a key role in restarting the economy. But with state and local tax revenue taking a hit, projects may need to wait on funding to come through.
“The reality is, infrastructure spending for the next year for 2021 largely will depend on what types of stimulus packages do in fact come to fruition,” says Dennis Truax, 2021 president-elect of the American Society of Civil Engineers.
With fewer people traveling and commuting because of COVID-19, rail ridership has suffered, fuel consumption has fallen and the airline industry has been decimated.
“The transportation system, which is reliant on user fees, taxes and tolls, has been very badly hit,” Truax says. “And this is going to have a long-term impact on replacing, rebuilding and maintaining that infrastructure.”
That’s where a federal infrastructure stimulus could come in, and firms are making plans for what projects they could quickly set into motion. “As we get into infrastructure post pandemic, some sort of infrastructure package will be needed,” Truax says.
Texas Projects Prioritized
Executives with infrastructure firm AECOM have identified Texas projects they believe should be fast-tracked if stimulus funding comes through.
AECOM evaluated projects based on criteria from a “stimulus checklist” the firm created to determine which projects make the most financial sense for the region. Nationwide, the firm identified 100 “job-ready” projects—meaning projects that would be ready for work within three to 12 months.
“When we think about right now in financial markets, [the cost of] capital is at an all-time low. So if there ever was a financial reason to move projects forward, the time is now,” says Wendy Lopez, AECOM senior vice president.
In metro Houston, AECOM is looking at one key infrastructure investment—the proposed $32-billion Coastal Spine, a series of projects that would provide storm surge protection along the Galveston coastline. High-speed rail between Dallas and Houston is another target, and AECOM’s Hyperloop Texas project would allow people and goods to travel between major Texas cities within 30 minutes.
“I think now is the time for us to think big and bold, and not to end up doing maintenance projects,” Lopez says.
Highway Funding Shortfalls
Funding for highway and transportation projects has been especially hard hit by the pandemic, and that could carry into 2021.
The American Road & Transportation Builders Association reported that $9.6 billion in state and local transportation projects were delayed or canceled as of August. In Texas, the State Highway Fund, which receives transfers from oil and gas tax revenue from the previous fiscal year, is expected to lose $600 million in FY2021 fiscal year because of taxes collected in 2020. Then it could lose another $480 million for FY2022.
Scott Haywood, HNTB vice president and client service leader for the Texas Dept. of Transportation (TxDOT), believes the market for Texas highway projects continues to look strong. HNTB is working on projects including the I-35 Northeast Expansion Central Project and the I-45 North Houston Highway Improvement Project.
“As governmental entities continue to adjust to changes in projected revenues, we anticipate a lot of conversation around what levels of infrastructure investment will occur in 2021,” Haywood says. “However, there is a great deal of optimism for what that investment will be as infrastructure continues to play a key role in the economic recovery.”
In Mississippi, maintenance of existing infrastructure through pavement and bridge rehabilitation projects will remain a focus for the Mississippi Dept. of Transportation in 2021, says MDOT executive director Melinda McGrath. “The majority of our projects and largest amount of our funding will address aging pavement,” McGrath says.
If the state receives additional federal funding, McGrath says MDOT would want to pursue shovel-ready capacity projects for parts of the state that are experiencing increased population, traffic and freight movement.
“Those areas would benefit from four-lane expansions and shoulder improvements,” McGrath says. “However, we don’t currently have funding to address those needs while also bringing pavement back to a state of good repair.”
Mississippi has come under increased scrutiny in recent years for its failing infrastructure, and state leaders have repeatedly lobbied lawmakers for serious infrastructure spending. In April, the ASCE in its 2020 Infrastructure Report Card gave the state an overall D+ grade, with roads and bridges each receiving D-.
The state took steps to increase infrastructure funding by creating the Mississippi Infrastructure Modernization Act of 2018 to use 35% of state tax revenue to help municipalities pay for roads and bridges. Also in 2018, lawmakers established a state lottery that each year, through 2028, would designate the first $80 million of its annual net proceeds for state roads and bridges. “The lottery has been a huge benefit to rural communities that might not get funding otherwise,” McGrath says.
Windfall For Coastal Projects
Coastal restoration will be a major focus for Louisiana in 2021 as the state begins to fund projects with its share of settlement money from the 2010 Deepwater Horizon oil spill. Through November, the state approved more than $900 million for restoration projects and planning in Jefferson, Plaquemines, St. Bernard and Terrebonne parishes.
The Louisiana Coastal Protection and Restoration Authority in March approved a historic $1.1-billion coastal spending plan for FY2021, including $804 million for construction. But some of that progress could be curtailed by a lack of state funding. More than half of the funding for the 2021 budget comes from the BP settlement. But the plan also hinges on infrastructure funding from the state’s 20-cent gas tax in a year when gasoline tax income has been largely flat.
The coastal restoration plan would fund $75.5 million for the $760-million West Shore Lake Pontchartrain hurricane levee project, which the U.S. Army Corps of Engineers New Orleans District will continue to work on in 2021. But that funding depends on whether the state can cover its 35% share of the project. The Corps will work on several other projects, including the Comite River Diversion and four remaining projects under the Southeast Louisiana Urban Flood Control (SELA) plan.
For road projects, the Louisiana Dept. of Transportation and Development started work in November on a $152-million project to widen 10.5 miles of Interstate 10 in Calcasieu Parish. Work is progressing on a $125-million interchange project on I-10 near Louis Armstrong New Orleans International Airport in Kenner.
In southwest Louisiana, Burns & McDonnell continues to address the state’s existing energy infrastructure after helping Entergy Corp. bring back power to the area’s 219 transmission lines and 292 substations damaged by Hurricane Laura.
“As part of our efforts in this full-scale reconstruction, we’re supporting the utility with storm hardening and resiliency upgrades throughout its territory in 2021,” says David Kinchen, the firm’s regional construction/design-build manager in Dallas-Fort Worth.
States Tap Ongoing Funding
For now, Oklahoma and Arkansas have state funding in place to allow them to carry on with infrastructure projects in 2021.
In November, Arkansas voters approved the renewal of a half-cent sales tax increase, which could raise $290 million annually for road and bridge projects, with about $205 million going to the Arkansas Dept. of Transportation and $85 million to cities and counties.
Meanwhile, Oklahoma in 2021 will continue to carry out its eight-year construction work plan, which started in 2020 and runs through 2027. The plan includes nearly $6.5 billion in federal, state, local and tribal transportation funding for 1,396 total projects for the Oklahoma Dept. of Transportation.
Larry Rooney, Manhattan Construction Group president, sees an evolution under way in infrastructure construction that could bode well for 2021 projects. “I believe the term ‘infrastructure’ in the traditional sense is changing, especially given the need to expand transportation/delivery capability and broadband connectivity to rural America,” says Rooney, whose firm is the parent company of Manhattan Construction Co. in Tulsa.
Logistical demands for e-commerce deliveries, self-driving cars, electric vehicles and other innovations will also change the way people move around. If any stimulus funding does come through in 2021, Rooney says the industry will need to be ready to work quickly to gain value from stimulus projects. The challenge continues to be the availability of labor. “I’m optimistic, given the current state of unemployment, that our industry may be able to recruit and train workers from displaced industries to accomplish these projects,” he says.
Much of Manhattan Construction’s infrastructure work has focused on bridges and earth retention systems, especially in urban areas where the demand for more traffic lanes presents construction challenges. One example is the I-630 expansion in Little Rock; the firm completed the project in March. “We are fortunate to have a strong backlog of projects going into 2021, and we continue to see opportunities upcoming in the next six months,” Rooney says.
Mike Griffin, vice president and director of aviation for Little Rock-based Garver, says most of the firm’s clients in sectors including aviation, water and transportation have a head start in infrastructure spending that can be fast-tracked after COVID-19. “Facility managers that can leverage new infrastructure funding from Washington with lower interest rates on local bond issues, for example, will be very well prepared when and if Congress acts,” Griffin says.
Even with fewer travelers, Griffin says the aviation sector shows promise for 2021.
Louisiana and Texas are seeing the most activity, with pavement projects underway and continuing into 2021 at Dallas Love Field, Clinton National Airport in Little Rock, Armstrong International in New Orleans and George Bush Intercontinental Airport in Houston.
Time to ‘Step Up’
Kinchen of Burns & McDonnell expects that public infrastructure investments funded by tax and revenue bonds will likely take a hit into 2022. The good news, he says, is that the demand for public infrastructure investment hasn’t gone away and should only grow as projects are delayed. “My expectations of a post-COVID-19 recovery are similar to the growth we experienced after the recession of 2009, except the demand will be even greater than before,” Kinchen says.
However things play out, Tony Loyd, AECOM vice president, believes the industry will have an important role to play in the recovery.
“Just like the medical community really performed in a stellar way during the pandemic to help save lives, I think it’s time for engineers now to step up and put Americans back to work,” Loyd says. “That’s what our profession is in place for.”