Inflation reduces the value of the infrastructure law

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When President Joe Biden signed the $1.2 trillion infrastructure bill into law last November, Ohio state transportation officials were ready.

“Ohio still has projects waiting for funding,” said Matt Bruning, spokesman for the state Department of Transportation.

“When we get these additional funds, we are ready to launch a project. We can just take the plans off the shelf and go,” he added.

But Bruning said his department needed to recalculate as prices rose in the eight months since the bill was signed, with inflation hitting a 40-year high and hitting everything from Americans’ grocery bills to repairing bridges.


What do you want to know

  • Inflationary pressures affecting consumers nationwide are also eating away at federal dollars provided by the $1.2 trillion bipartisan infrastructure bill.
  • State officials from North Carolina to Ohio tell Spectrum News they are back to the drawing board due to higher costs, often delaying projects
  • According to ABC’s analysis of US consumer price data, overall construction costs are up more than 20% from a year ago; Key materials like iron and steel are 16% higher
  • Transportation Secretary Pete Buttigieg told Spectrum News that the backlog of state and local infrastructure projects across the country is a “real issue” his department is watching.

That meant pausing some state infrastructure projects and breaking others up into smaller pieces to do at least some of the work, like the planned Interstate 75 expansion near Cincinnati.

“Unfortunately, a lot of those federal bill resources are just filling the gap for inflation, rather than allowing us to do additional things,” he said. “We will continue to do the work necessary to keep our system in good condition. But it may take longer.

The same inflationary pressures that are pinching consumers nationwide are also reverberating throughout the construction industry — and reducing the value of federal infrastructure investments.

The Ohio Department of Transportation is breaking up a planned I-75 expansion project into smaller pieces due to higher construction costs. (Courtesy of ODOT)

Michael Bellaman, president of industry group Associated Builders and Contractors, told Spectrum News he was seeing a “perfect storm” of supply chain disruptions, more expensive materials and labor shortages. work that weighed down construction projects everywhere.

“The water pipe no longer flows well and smoothly,” he said. “You’re just going to have to do less for more.”

“If you had a $100 million budget, you still have the $100 million, but you’re not going to get $100 million built in 2020,” Bellaman added.

According to ABC’s analysis of U.S. consumer price data, overall construction costs are up more than 20% from a year ago. Key materials like iron and steel are 16% higher.

And rising global oil costs are hitting contractors everywhere, from transportation and shipping to basic materials like plastics and glues. Crude oil – a key item in these articles – was up 77% year over year.

Transportation Secretary Pete Buttigieg told Spectrum News that the backlog of state and local infrastructure projects across the country is a “real issue” his department is watching.

“$1.2 trillion is, of course, a huge amount of money. But it can actually get diluted if inflation takes away some of the value,” he said.

“We are working to ensure that we have fast decisions and fast processes. Because the longer it takes to get through the paperwork, the more inflation reduces the value of a grant,” Buttigieg added, noting that they are also working with local partners on “best practices to keep costs down. under control “.

North Carolina state officials echoed Bruning’s concerns in Ohio.

Boyd Tharrington, the state’s construction engineer, told Spectrum News that as the Department of Transportation re-evaluates its ten-year budget, as it does every two years, “there are projects that don’t are more funded.

But even as they go back to the drawing board on new plans, the federal money helps keep ongoing projects on track, Tharrington noted.

“The new money helps us maintain the program and keep these projects on schedule,” he said.

Additionally, an additional portion of the state tax will now go to NCDOT as part of a new budget, another boost for transportation as the state expands, Tharrington added.

A 2019 gas tax increase in Ohio is also helping improve highways there, Bruning said.

But ABC’s Bellaman also warned that some local and state government projects could be pushed back as contractors are inundated with work.

ABC is tracking a national construction backlog that in June reached about eight months for infrastructure projects.

“These contractors are going to become more and more selective as their backlog continues to grow,” he said. “There is a limited supply and more demand, okay? So you have to be an attractive customer.

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