Outlook for Traffic and Congestion Management

SLIDE 1

By William Buechner, PhD.
VP for Economics and Research
American Road & Transportation Builders Association

October 10, 2007

SLIDE 2
  • The growing imbalance between highway demand and capacity
  • Impact of inflation on the purchasing power of state and federal highway funds
  • Highway investment needs vs. available funds
  • SAFETEALU reauthorization
SLIDE 3

No Surprise Why Highway Congestion Gets Worse and Worse

A bar chart displays highway traffic data with Population, Drivers, Vehicles, Vehicle miles traveled, Lane-miles of road, Hours of delay on the X-Axis and Increase 1982-2006 on the Y-Axis.

Source: U.S. Census Bureau; Federal Highway Administration; Texas Transportation Institute

SLIDE 4

Looking Forward to the Next 25 Years, the Outlook Is For No Relief

A bar chart displays highway traffic data with Population, Drivers, Vehicles, Vehicle miles traveled, Lane-miles of road, Hours of delay on the X-Axis and Increase 2006-2031 on the Y-Axis.

Source: U.S. Census Bureau; ARTBA analysis of FHWA, TTI data

SLIDE 5

Work Zones – New Starts of Highway and Bridge Construction Projects 

A bar chart displays new starts of highway and bridge construction projects from 1997 to 2007 with Year on the X-Axis and number of the Y-Axis.

Source: ARTBA analysis of data from McGrawHill Construction Economics

SLIDE 6

Would Expect More Work Zones from Increase in Federal Funding in STEALU

A bar chart displays federal funding for FY 98 to FY-09 by Year (X-Axis) and Billions of dollars (Y-Axis).

Source: Federal Highway Administration

SLIDE 7

Since 2003, Cost of Highway Construction Materials Has Risen 42%

 A bar chart displays the increase cost of highway construction materials by year and month for 2002 to 2007

Source: Bureau of Labor Statistics, PPI for Highways and Streets

SLIDE 8

Cost of Steel Started the Process, Almost Doubling in Price in Early 2004

A bar chart displays the increased cost of steel by year and month for 2002 to 2007

Source: Bureau of Labor Statistics, PPI for Hot Rolled Bars, Plates & Structural Steel

SLIDE 9

Then Prices for Core Highway Construction Materials Began to Rise, Including Crushed Stone 
(Up 31%)

A bar chart displays the increased price for core highway construction materials by year and month for 2002 to 2007

Source: Bureau of Labor Statistics, PPI for Construction Sand, Gravel and Crushed Stone

SLIDE 10

…Ready-Mix Concrete (Up37.3% Since 2003)

A bar chart displays the increased price for ready-mix concrete by year and month for 2002 to 2006

Source: Bureau of Labor Statistics, PPI for Ready-Mix Concrete

SLIDE 11

…And Asphalt Paving Mixtures (Up 53.6%)

A bar chart displays the increased price for asphalt paving mixtures by year and month for 2002 to 2006

Source: Bureau of Labor Statistics, PPI for Asphalt Paving Mixtures & Blocks

SLIDE 12

 Have Not Seen Such Inflation in Highway Construction Materials Since Late 1970s

A bar chart displays the inflation rate in highway construction materials from 1995 to 2007

Source: Bureau of Labor Statistics. PPI for Highway and Street Construction

SLIDE 13

Total Highway Construction Costs, inc. Labor and Overhead, Are Up 26 Percent Since 2003

A bar chart displays the total highway construction costs by year from 1995 to 2007

Source: Bureau of Labor Statistics. PPI for Highway and Street Construction

SLIDE 14

Rising Highway Construction Costs Have Reduced Purchasing Power of Federal Gas Tax

A bar chart displays the Federal Gas Tax by year from 1993 to 2014

Source: ARTBA calculations from BLS data

SLIDE 15

Federal Gas Tax Would Have to Be 28.8 CpG in 2007 to Maintain 1993 Purchasing Power of 
18.3 CpG

A bar chart displays Federal Gas Tax by Year from 1993 to 2014, assuming the rate in 2007 is 28.8 CpG

Source: ARTBA calculations from BLS data

SLIDE 16

Guaranteed Funding After Effects of Highway Cost Inflation

A bar chart displays federal funding through TEA-21 and STEA-LU by year from FY 98 to FY 09

Source: ARTBA calculations from FHWA and BLS data

SLIDE 17

State & Local Budget Crisis of 200104 Cut Value of Construction on Highways and Bridges, 
Affected # of Work Zones

A bar chart displays state and local budget by year from 2001 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 18

Some Growth in 2005, 2006 (Covering Higher Costs) but Has Tapered Off in 2007

A bar chart displays percent change of state and local budget by year from 2001 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 19

This Summer, Value of Construction Work on Highways and Bridges Was Up Less than 1.5% Vs. Summer of 2006

A chart displays Value of Construction Work on Highways and Bridges by month for 2005 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 20

Value of Construction Work on Highways Took a Big Hit During the Budget Crisis

A chart displays Value of Construction Work on Highways by year for 1993 to 2014

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 21

Rate of Growth Has Been Pretty Anemic in 2006 and 2007

A bar chart displays the rate of growth by year for 2001 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 22

Real Action in 2006 and 2007 Has Been in Bridge Construction

A bar chart displays the value of bridge construction by year for 2001 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 23

Value of Construction Work on Bridges Has Increased 59% in Just Two Years

A bar chart displays the percent change in value of construction work on bridge by year for 2001 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place

SLIDE 24

Not All Federal Highway Funds are Getting into the Spending Stream

A chart displays Obligations for Highways and Guar. Funding by year for 1998 to 2007

* $2 billion transferred to FY 05 on last day of FY 04

SLIDE 25

Unobligated Earmarks at End of Fiscal Year

A bar chart displays unObligated earmarks at the end of each Fiscal Year from 2002 to 2007

Source: Federal Highway Administration

SLIDE 26

Virtually All the Growth Has Been With State & Local Funds – Up 40% Since 2004

A bar chart displays Federal and State & Local Funds by year from 2000 to 2007

Source: ARTBA, Value of Transportation Construction Put in Place, FHWA

SLIDE 27

Comments on State and Local Funding

  • Rising cost of construction materials has strained highway budgets – S&Ls had to stretch to start & continue planned projects
  • Not much meat left on these bones
    • State & local spending still running ahead of tax revenues – budgets better but not good
    • Capital spending already near peak percent of total spending
SLIDE 28

Outlook for Federal Highway Funding in FY 2008

  SAFETEA-LU President’s
Budget		 House
Approps		 Senate
Approps
Highway $39.6
billion +
RABA		 $39.6
billion, no
RABA		 $40.2
billion, inc.
$631 mill
RABA		 $40.2
billion, inc.
$631 mill
RABA
Transit $9.7 billion $9.4 billion $9.7
billion		 $9.56
billion
Airport
(AIP)		 $3.52
billion
(FY07)		 $2.75
billion		 $3.6
billion		 $3.52
billion

SLIDE 29

Current Progress

  • Both House and Senate have passed FY 2008 transportation appropriation bills that
    include the RABA bonus
  • President has threatened to veto approps bills that exceed his request
  • Will likely include new earmarks
  • State DOTs will get no more, maybe less, formula funds than in FY 07
  • Operating under CR at FY07 funding level
SLIDE 30

Background for FY 2009 and Beyond

  • When enacting SAFETEALU, Congress refused to consider an increase in federal gas tax
  • To fund SAFETEALU, Congress spent all Highway Trust Fund (Highway Account) revenues for FY 200409 plus all of the cash balance
SLIDE 31

New Projections Show $ 4.3 Billion Highway Account Balance by FY 2009

A bar chart displays Projected End of Year Balance in Highway Account by year for FY 04 to 09

Source: FHWA estimates for MidSession Review of FY 2008 Budget

SLIDE 32

Option 1: Cut $15.9 Billion in FY 2009 to Save $4.3 Billion of HA Outlays

A bar chart displays annual totals for 2004 to 2009

Note: Annual totals include funding for NHTSA & FMCSA

SLIDE 33

Option 2: Senate Finance Proposal to Generate Needed New Revenues

  • Reimburse HTF for emergency spending since 1998
  • Suspend fuel tax exemptions for six months
  • Reduce fuel tax evasion
  • Generates $5.7 billion through FY09, included in FAA authorization bill
SLIDE 34

U.S. Needs to Invest $100 - $120 Billion in Highways Each Year to Maintain Conditions and Performance

A bar chart displays Cost to Maintain, Actual Construction,and Federal Funding to Maintain for 2004 to 2015

Source: U.S. DOT, 2006 Conditions and Performance Report, adjusted for projected inflation

SLIDE 35

Federal Highway Funding Far Short of Amount Needed to Maintain Conditions

A chart displays funding Needs, SAFETEA-LU, and HA Revenues for 2004 to 2015

Source: ARTBA analysis of 2006 Conditions and Performance Report; U.S. Treasury forecast

SLIDE 36

ARTBA Reauthorization Recommendations

  • Enhance existing federal highway program with needed resources – gas tax increase of at least 10 cents per gallon
  • Create new Critical Commerce Corridors program for freight transportation, financed by new user fees on freight shippers
SLIDE 37

Conclusion

  • Cost of constructing highways and bridges has skyrocketed since 2003
  • State and local highway budgets have been stretched to the limit
  • Federal highway funding under SAFETEALU has barely covered higher costs, no real
    increase
  • Outlook for congestion, work zones depends on level of federal investment in next highway
    authorization bill
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