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Infrastructure Funding Delays Cause Ripples

Credit: Allison Hurt/NPR

By Roland Murphy and Rebekah Morris for Arizona Builder’s Exchange

Last month, the White House assured the nation that President Trump remains committed to the massive infrastructure investment (up to $1T) he promised during the campaign.

However, a report by The Hill says any serious discussion of the program’s details will likely be pushed to next year.

As often happens in national politics, the infrastructure plan was put on the back-burner to deal with more high-profile concerns. The first of which was an attempt to overhaul the Affordable Care Act, which consumed much of the administration and Congress’ first six months of the term but ultimately yielded no results.

In the wake of that highly publicized failure, congressional leaders want to push on to tax reform. The Hill quoted South Dakota Republican Senator John Thume as saying, “I’d like to see infrastructure get done, but I’ve always said, that in terms of how things are sequenced, it’s more likely that they would do tax reform first. And that might push infrastructure into sometime next year.”

In an effort to make at least some progress on the measure, however, the administration in July issued an executive order to formally establish an infrastructure council that will examine potential projects around the country, in addition to other related issues.

Ripple Effect

While no one who has watched program-based politics and general budget-impacting programs ever expects rapid resolution, the lack of a solid plan has created some ripples in the construction industry.

For example, in its recently released Q3 2017 Construction Starts Forecast Report, ConstructConnect has revised its prediction of year-over-year value in starts from 4.8 percent in Q2 down to 4.5 percent.

Trump is expected to provide additional details after the traditional August legislative recess period. The long-expected general gist of the program is expected to be a $200B federal contribution intended to stimulate up to $800B in private investment. No one knows, however, what that program structure will actually look like, and the industry is sitting in a wait-and-see pattern.

The often neglected caveat to the concept of private investment for public assets is the very real expectation that the private investors demand a return on investment. Current tax revenue is committed to current expenditures. The only way this sort of private investment works is to create a new revenue stream to pay back the investors. Wildly unpopular ideas like toll roads do this – a new revenue stream is created to pay for a new road.

Infrastructure Investment Lags

Infrastructure projects around the country largely took a patch and repair approach during the Great Recession, as both state and national programs dealt with reduced budgets and widespread needs. Unfortunately, in many areas, infrastructure projects had already been low-to-middle priority, and the setbacks contributed to an increasing erosion in quality.

A recent report from NPR, using the state of bridges as a barometer for infrastructure as a whole, found 1-in-10 bridges across the country rated as structurally deficient a full decade after the Interstate 35W collapse in Minneapolis was supposed to serve as a national wake up call.

The Arizona Connection

Arizona is better off than much of the rest of the country, however. The American Society of Civil Engineers gives the state’s bridges a solid “B”, and the overall infrastructure a “C”.

The American Road and Transportation Builders Association ranks 187, or 2.5 percent, of Arizona bridges as structurally deficient.

According to ASCE’s most recent Infrastructure Report Card, “Arizona’s bridges are generally in good condition due to the bridge inspection program; however, funding to maintain them and to support the State’s above average growth rate will be a major issue in the years ahead. Only 51 percent of fees like the Vehicle License Tax are actually used for transportation and federal funding has become unreliable.”

The state’s roads, however, fare more poorly than its bridges. ASCE scores Arizona a “D+” for the state of its roads, with 17 percent of urban roads listed in poor condition. Only half of the state’s anticipated roadway needs will be able to be met with expected baseline revenues – primarily generated both in-state and nationally by gas tax revenues – which have been repeatedly diverted to deal with other funding priorities.

While Arizona may be better off in the aggregate than many states, it really can’t afford to maintain the holding pattern much longer.

According to ASCE’s report, “The Arizona Department of Transportation estimates that over the next 25 years a minimum of $24B will be required just to maintain current assets, with a minimum of $49M required to bring the state transportation system up to acceptable performance levels, and as much as $193M required support an aggressive growth strategy.”

While Arizona’s share of the Trump infrastructure program, even if fully-funded and flawlessly executed with no unintended consequences or repercussions of any kind, wouldn’t completely manage any of those funding levels, it would certainly be a help.

In the meantime, Arizona and the rest of the country will continue wait and see.

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