Inflation taking bite out of new infrastructure projects

Posted 3 days ago


The $1 trillion in federal infrastructure investment sparked by the massive bill President Joe Biden signed last year is starting to kick in.

But many projects around the country are being stalled or delay - or facing double the projected costs - because the highest inflation in 41 years is pushing up the prices of materials.

There is also a widespread shortage in workers, further hampering efforts to rebuild or revamp roads, bridges, airports and water systems across the country.

The price of a foot of water pipe in Tucson, Arizona: up 19 percent. The cost of a ton of asphalt in a small Massachusetts town: up 37 percent. The estimate to build a new airport terminal in Des Moines, Iowa: 69 percent higher, with a several year delay.

The price hikes already are diminishing the value of a $1 trillion infrastructure plan Biden signed into law just seven months ago. That law had included, among other things, a roughly 25 percent increase in regular highway program funding for states.

Many economists and Republicans say the influx of federal funds is one of the leading causes of skyrocketing inflation, and money set aside for the projects is being rendered useless.

'Those dollars are essentially evaporating,' said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials. 'The cost of those projects is going up by 20 percent, by 30 percent, and just wiping out that increase from the federal government that they were so excited about earlier in the year.'

In Casper, Wyoming, the low bid to rebuild a major intersection and construct a new bridge over the North Platte River came in at $35 million this spring - 55 percent over a state engineer's estimate. The bid was rejected and the project delayed as state officials re-evaluate their options.

'If this inflation keeps the way it is, we will have to roll projects from one year into the next, into the next, into the next,' said Mark Gillett, chief engineer of the Wyoming Department of Transportation.

Examples of projects receiving a major re-evaluation because of inflation include:

* Des Moines International Airport: Four years ago, a new 14-gate terminal was projected to cost $434 million and be open by 2026. By this spring, the cost had soared to $733 million

* Series of bridge repairs along Interstate 55 in St. Louis, Missouri, came in at $63 million this year, 57 percent over the budgeted amount

* In Huntington, Massachusetts, a 1.5-mile stretch of road won't be finished this year after a 37 percent spike in the price of liquid asphalt

* Residents  west of Little Rock, Arkansas, will pay a $146 monthly surcharge to Central Arkansas Water to install new water lines - 17 percent more than planned

Gillett had hoped the federal Infrastructure Investment and Jobs Act would finance a boom in highway and bridge construction.

'But it's just not going to go as far as we had hoped,' he said.

In addition to roads, the federal infrastructure bill includes billions of dollars for water projects, railways, airports, broadband internet, electric grids and green-energy projects over the coming years.

Inflation has affected the entire U. S. economy, posing one of Biden's biggest challenges during a midterm election year. Fuel, food and housing costs all have shot up. Consumer prices surged 8.6 percent in May over last year, the highest rate since 1981, according to the U.S. Department of Labor.

Prices for some key materials in infrastructure construction have risen even more. Prices paid to U. S. manufacturers of asphalt paving and tar mixtures were up 14 percent in May compared to last year, according to data from the Federal Reserve Bank of St. Louis. Prices for fabricated steel plate, used in bridges, were up 23 percent, and ductile iron pipes and fittings - used by water systems - were nearly 25 percent higher.

The hikes are being driven by a variety of factors, including worldwide supply-chain backlogs, strong consumer and business spending in the U. S., Russia's invasion of Ukraine - and, some argue, federal energy and fiscal policies.

Rep. Sam Graves, the ranking minority member on the House Transportation and Infrastructure Committee, contends the infrastructure law itself is contributing to inflation by pouring more federal money into an economy already flush with trillions of dollars in federal pandemic aid.

'They are borrowing more money so they can spend more money, (which) is dr... (Read more)