Danish company agrees to buy Eversource's stake in Sunrise Wind offshore project

Luther Turmelle

Jan. 25—Officials with the Danish renewable energy company Ørsted said Wednesday they have signed an agreement to acquire the 50 percent ownership stake that Eversource Energy has in Sunrise Wind, an offshore wind farm designed to provide electricity to New York State.

Terms of the agreement were not immediately available. The two companies had started out as partners in the 924-megawatt joint venture.

Ørsted officials said the deal is contingent on New York State's ongoing solicitation of offshore wind capacity and the signing of a contract with state officials. If that does not occur, the Eversource-Ørsted joint venture for Sunrise Wind will remain in place and the two partners will reassess their position.

Ørsted's deal with Eversource comes months after the Danish energy company stopped development on some U.S. offshore wind projects. The company announced in November it was stopping development on the 2,248-megawatt Ocean Wind 1 and 2 projects off the New Jersey coast because of supply chain delays and higher construction costs.

News of the agreement also comes two weeks after Eversource officials announced they expect to write off as much as $1.6 billion against its 2023 fourth quarter earnings. The write-offs against earnings will come once Everource completes the sale of its ownership stake in Sunrise Wind and two other offshore power projects, South Fork Wind and Revolution Wind.

If Sunrise Wind is awarded the wind power supply contract under New York State's current bid, the project is expected to be finished in 2026.

David Hardy, a group vice president and chief executive officer for Ørsted's operations in the Americas, said company officials agreed to take full ownership of Sunrise Wind after a through review of the risks involved.

"This transaction is a value-accretive opportunity for Ørsted and the best path forward for the project," Hardy said in a statement. "Sunrise Wind will be our third offshore wind farm off the Northeast coast, following South Fork and Revolution Wind, which are already under construction. The Northeast is an increasing priority for Ørsted, including these projects, port assets, a trained workforce, and supply chain partners."

Joe Nolan, Eversource's president and chief executive officer, said the company is "proud of the work we have already accomplished for Sunrise Wind and look forward to continuing our leadership position building onshore interconnection systems for offshore wind projects in the Northeast."

Ørsted operates the first wind farm built in the United States, which started operating off the coast of Block Island at the end of 2016. Eversource is Connecticut's largest electric distribution company, and also has customers in Massachusetts and New Hampshire

Demolition of First Congregational Church in New London begins

Kimberly Drelich

New London ― The demolition of the historic First Congregational Church in New London began late Saturday morning, as a growing crowd of people watched.

A grapple excavator removed parts of one of the church’s towers and then lowered and dropped the building materials onto the existing pile of rubble from Thursday’s steeple collapse. The pile was then sprayed with water from a fire hose.

No one was injured in the steeple collapse on Thursday afternoon. A secretary was inside the building at the time, but got out safely.

On Saturday morning, people took photos and videos and talked about the church, as the remaining parts of the structure started to be demolished.

New London resident Christine Derham, who was among the people watching the demolition Saturday morning from Union and State streets, said it was sad to see the demolition of the church that served as a community hub where people could get meals, if they needed them, and to see a piece of history gone.

The church was a sight she has seen every day since moving to New London about a decade ago.

“This is so much a part of the city,” Derham said of the church. “This is something I see every day walking the dog.”

Derham said there are no words to describe how something that looked so solid could just fall over as it did on Thursday, “but thank goodness no one was injured.”

New London residents Goose Wallace and Jake Fitzpatrick were relieved that no one was injured in Thursday’s collapse, which was their top concern.

The friends were talking earlier Saturday morning about how many memories the church held for people, who celebrated weddings or got meals there, and hoped some of the materials could be salvaged to preserve those memories.

“I think that seeing all the old architecture is really intriguing but it’s also very sad to see all the hard work that so many people put into it just be turned to dust a little bit,” said Wallace, who noted that a cross-section of the church was visible due to the demolition.

Wallace, who recently moved to New England, added that the collapse raises the question of how many other buildings are a day away from a potential collapse.

New London Mayor Michael Passero was on scene watching the demolition.

“The reality is really starting to sink in that we've lost an incredible historic asset in the city,” Passero said. “But also just looking at the way this building is crumbling, falling apart, it’s just a revelation that probably in the city and all over the state there are buildings in this condition that are going to have to be addressed.”

“We’ve already begun talking about how we’re going to be able to obtain inspections on other substantial structures like this that could possibly pose a risk to the public’s safety,” he added.

By a little before 4:30 p.m. Saturday, the right tower was knocked about three quarters of the way down, and work was being done on the left tower, closer to the Manwaring Building, according to Fire Marshal Vernon Skau.

By early evening, a significant part of both towers had been demolished.

Skau said demolition is expected to continue Sunday and through the week.

The cause of the collapse of the church steeple remains under investigation, he said.

Fay & Wright Excavating Acquires Blastech Inc.; Forms New Company

Fay & Wright Excavating, one of the largest custom rock crushing service providers in the Northeast, recently announced that its ownership team has acquired the assets of Blastech Inc.

Forming a drilling and blasting company to work in conjunction with its custom crushing is not a new idea — this is a concept Fay & Wright has been providing for some time.

Blastech has been a trusted name in drilling and blasting for more than 30 years, As a result of the acquisition, Fay & Wright has formed a new company, Tri-State Drilling and Blasting.

All Blastech employees have chosen to join Tri-State Drilling and Blasting, bringing with them decades of experience.

According to Lee Baldwin, vice president of Fay & Wright Excavation, the creation of Tri-State Drilling and Blasting just made perfect sense. The company provides drilling and blasting services for construction sites, quarry and mining projects and blasting. In addition to working on structural demolition projects, Tri-State Drilling and Blasting provides controlled blasting, mass-rock blasting, boulder drilling, ditching and foundation blasting services.

Located in Goshen, Conn., Fay & Wright Excavating was founded in 1983 and offers its clients mobile solutions for all types of aggregate processing needs, including rock crushing, concrete crushing, asphalt recycling, screening and site work. From the company's inception, it has been known as a leader in the contract aggregate crushing business.

In 2015, Fay & Wright Excavating was purchased by Jared Dennis, a 10-year employee of Fay & Wright, and Lee Baldwin, who had an extensive background in the sales and operation of heavy equipment. Since their purchase of the company, Fay & Wright Excavation has experienced a period of unprecedented growth, including a substantial amount of work for New England, New York and New Jersey quarries.

"Putting Tri-State Drilling and Blasting and Fay & Wright Excavating under the same umbrella of ownership is going to give each company a tremendous competitive advantage," Baldwin said. "Going forward, when we come in to price a job, we can offer a single number, from drill to blast to crush.

"Over the years, we often found ourselves frustrated trying to coordinate our crushing operations and schedules with the drilling and blasting contractor," he added. "This will eliminate that, making operations far more fluid and efficient for us while allowing us to be more cost effective for our customers.

"The drilling & blasting industry is a high liability, tightly regulated business. There are really not that many people in that line of work anymore, so for us to be able to offer that service is going to be a tremendous asset.

"With the purchase of Blastech's assets, we have acquired six drills, which gives us the opportunity to be at multiple sites simultaneously. All of us at Fay & Wright Excavating and Tri-State Drilling and Blasting are looking forward to another period of strong growth for each of our companies."

For more information, visit tristatedb.com. CEG

Three long-awaited Norwich projects receive approvals, updates

Claire Bessette

Norwich ― By this coming fall, there could be a locally owned restaurant open in the former racquetball court, and retail space, offices and apartments under construction, as Mattern Construction Inc. works to erase remnants of the long-closed former YMCA on Main Street.

The Norwich Planning Commission unanimously approved Tuesday the Baltic company’s plan to transform the blighted building across from the new Hotel Callista at a key downtown gateway into a mixed-use commercial and residential development. The plan includes eight one-bedroom market-rate apartments, space for a restaurant, three 1,200-square-foot retail spaces and office space for Mattern to move its headquarters into the building.

The building has two stories on the Main Street side and rear lower level.

A portion of the existing building that housed the small pool room is being demolished as part of an environmental cleanup. Rear parking will occupy part of the space in the lower-level rear. Mattern plans to extend the second floor, as seen from Main Street to create a rectangle building. Eight apartments, four on the second floor and four on the third floor, will be built above an open, covered lower-level parking area for the tenants.

In front, an elevated concrete patio will allow for outdoor dining and canopied entrances for the proposed retail areas. The new left front corner of the building will be dominated by large glass panels in full view of drivers entering Main Street.

“This project is of significant importance to the continuing revitalization of downtown Norwich,” company President Eric Mattern told the planning commission Tuesday, “and will be the first of many that will bring new life to Main Street and beyond.”

The former large pool room will be made weather tight and left alone for now, allowing Mattern to market the space for pool use or alternate use in the future, project architect Matt Byrnes-Jacobsen said.

Mattern said the restaurant should be completed first by fall of 2024, with the apartments completed soon afterward and the three commercial spaces “completely leased” by fall of 2025.

“That’s wonderful,” planning commission member James Quarto said. “It’s a long time coming.”

Hale Mill, Reid & Hughes building projects

The former YMCA project was one of three projects on Tuesday’s agenda that could fit Quarto’s comment. The commission also voted unanimously to approve modifications to a hotel under construction at the granite former Hale Mill at 140 Yantic Road in Yantic. The changes to the plans approved in 2018 removed a planned tennis court and made drainage and grading improvements to the parking area and sidewalks to avoid wetland areas.

The commission also unanimously approved a plan by Heritage Housing, Inc. to renovate the long-vacant former Reid & Hughes building into 17 apartments and one or two street-front commercial spaces.

David McCarthy, president of Heritage Housing, said his company bought the building in August 2022 after the previous developer, the Women’s Institute for Housing and Economic Development, went into bankruptcy. Heritage Housing owns the Wauregan Apartments across the street.

Heritage asked the commission to approve its new plan and to vote to officially expire the Women’s Institute’s previous plan for 20 apartments for veterans’ housing in the building. McCarthy said the new plan is for apartments prices with a cap at 80% of area median income.

The commercial space will be 2,000 square feet, either as one unit or to be split into two spaces.

The building has challenges, McCarthy said, especially because it comes with no land beyond the building footprint. While there is no requirement for parking in the city urban center, he said the Wauregan garage should have five to 10 spaces that could be rented to Reid & Hughes tenants, and Heritage has approached the owner of an adjacent private parking lot about renting additional spaces.

The basement level is in a floodplain, so instead of creating recreation space there for tenants, McCarthy proposed allowing tenants to share the recreational amenities at the Wauregan. He proposed placing a bicycle rack, required for projects with four or more apartments, inside the building in a small corner.

The only landscaping will be narrow flower boxes along the front façade on Main Street, with a design to be approved later by the city planning staff.

Meriden highway project promises major, though still unknown, disruption to residents, businesses

Mary Ellen Godin

MERIDEN —Silt fences sit along the eastern edge of Interstate 91 behind Bee Street where the commuter lot is now a staging area for O&G Industries to park trucks and equipment. 

An access road cuts from the highway to Bee Street and a gravel road connects the commuter lot to the highway shoulder.  

Phase I of state Department of Transportation project number 72-245 has quietly begun in the city while the other two phases of an overall $500 million project to detangle I-91 and Route 15 north and south will begin when this phase is complete. "By April, it's going to get crazy," an O&G worker said Friday. 

Chrissy Biros, a co-owner of Olympos Diner on East Main Street, said that despite the DOT hosting two public hearings on the projects, she gets most of her updates from the road construction workers who come in for coffee and eggs. The Olympos Diner is near the East Main Street intersection with I-91, which will see much of the activity.

"I don't know how long it's going to last," Biros said. "But the people doing the work are going to eat. Places like us, you take into account interruptions like Covid. But there's also your awesome regulars who can find a way to get here."

Russell Bandecchi, the owner of Spoon Shoppe Brooke Deli, also on East Main Street, said he too gets his updates from the workers coming in for sandwiches. 

"It appears to be a five-year project," Bandecchi said. "I get a lot of customers from Middlefield and if the East Main Street exit shuts down, there is always Preston Avenue. I don't hear anything from the state, only the workers. We have a lot of local people here and from the state police academy," on Preston Avenue. "The state police are good at finding their way. Most people know where we are."

Dimitrias Klonaras is the owner of Huxley's Bookmark Cafe on East Main Street closer to the Middlefield line. He hopes that GPS systems are updated to account for detours. 

"The only downside will be if traffic is backed up," Klonaras said. "I have customers from Cromwell who get off at East Main Street. That will affect them if there is a whole bunch of traffic."

During a DOT informational public hearing about the project in August 2021, residents had questions about noise, hours of operation, wetland interference and eminent domain.

Project managers explained the plan was to start on I-691 in Meriden and travel easterly to the I-91 north merge. The existing sharp curve will be straightened out and become two lanes, while 691 at Preston Avenue will become one lane into Middlefield. A bridge will be rebuilt on the eastern side of 91 north while the existing bridge is in use. New signs, lights, drainage systems, guardrails and pavement will be included in the $57 million price tag for Phase I. 

Any lane closures will be during off-peak hours, as will the bulk of the construction. All work is being done in the DOT's right-of-way so there is no reason for property acquisitions, project managers said. Phase I is expected to take two years.

A second public hearing for Phase II and III of the highway reconstruction project was held in July 2022. Those phases, which address serious safety concerns north and south on Route 15 and I-91, are much more complex in scope. As the DOT addressed funding concerns, it was determined to complete the smaller project first.

At the second public hearing, residents again shared concerns about noise, delays, detours, exit closures and the impact on an ancient burial ground. Project managers assured the residents the burial ground won't be affected.

A DOT spokesman said Friday there would be no more public information sessions, however each of the three projects has its own website for regular updates and contact information for questions. 

City officials are relying on the state to keep residents and businesses informed.

"The city did help DOT with hosting two public meeting about the construction to get the word out about what is happening.," said Meriden Economic Development Director Joseph Feest. "The DOT is completely in charge of this project and people should go to the state's website.

"Not only city residents, but everyone that travels this busy section of the highway will be affected," Feest continued. "But the goal when completed is to fix the congestion. As stated this is going to be going on for a couple of years and we don’t know how bad the traffic will get or if people will temporarily choose an alternate route to avoid the construction."

Pedestrian bridge envisioned as ‘formidable gateway’ to New London

John Penney

New London ― The city is taking steps to transform a little-used 50-year-old pedestrian bridge into a “gateway” structure aimed at showcasing the city’s history and offerings to residents and visitors.

The City Council this month approved paying the Hartford-based Crosskey Architects firm $22,000 in American Rescue Plan Act funding to “reimagine and design” the Water Street walking bridge that connects the Winthrop Square housing complex on Federal Street to Fulton Park.

Director of Public Works Brian Sear said the bridge, built in 1973, is not in need of any structural improvements and any proposed work would fall under the aesthetic category.

“It has gotten vandalized over time with things like fencing being kicked out,” he said on Thursday. “But we addressed those issues about four years ago. It’s totally safe to cross and use.”

The span got heavier use years ago until the re-location in 2018 of tenants from the now-demolished Crystal Avenue apartments, many who crossed into downtown via the bridge.

Sear said plans to expand and improve park property on the Crystal Avenue side of the bridge will make the span a more attractive transportation option for walkers and cyclists, including those looking to visit downtown from nearby Connecticut College and the U.S. Coast Guard Academy.

Felix Reyes, the city’s director of economic development and planning, said Fulton Park is now home to refurbished basketball courts and a skate park. Brush clearing has also been conducted in the area and plans are in place to create more hard-surface walking paths to facilitate pedestrian and biker travel from Old Town Mill to the Fulton Park bridge entrance.

Reyes said the new bridge contract calls for the Crosskey firm to conduct an initial safety review of the span and provide recommendations on how best to highlight the “formidable gateway” to residents, visitors and businesses.

“It should encompass what New London is,” Reyes said. “That could mean focusing on the city’s historical significance, its arts and culture and its maritime past,” Reyes said. “And a welcome sign would make sense, something in English and Spanish.”

Reyes said he’s had one meeting so far with Crosskey principals with a project “kick-off” gathering in the works. He said no firm timeline has been set for when bridge recommendations will be submitted.

Any approved work such as painting or fence additions would be conducted by contractors with the city’s public works’ office in an oversight role. The Crosskey contract does not include the cost for any actual bridge improvements.

“And we’d have to decide if it’s done little-by-little or all at once,” Reyes said. “But that bridge, as it is now, is not representative of New London.”

Sportsbook at Hartford's XL Center is under-performing, as massive renovations are planned

Ken Dixon

Although it has only been open since September, the XL Center's Sports Bar & Fanatics Sportsbook in downtown Hartford could be on-track to lose up to $700,000 by the end of June.

Officials at the Connecticut Lottery Corp. and the Capital Region Development Authority say the under-performance of the restaurant and sports wagering operation can be blamed on the relative newness of the facility, which is currently less of a destination for gamblers than it is for people attending concerts and sporting events that might fill the restaurant and betting parlor on game nights, but do not swarm the place on others.

Shortly after the facility opened on the largely blank, Ann Uccello Street side of the XL Center in September, the lottery changed its vendor to the lesser-known Fanatics, which has been slow to change signage and ramp up marketing. Meanwhile, the wagering public seems to continue to focus on major locations, including FanDuel at the Mohegan Sun Casino & Resort and DraftKings in the Foxwoods Resort & Casino. By the end of December, the bar and sportsbook in downtown Hartford lost more than $280,000, which was first reported by the Hartford Business Journal.

The financial losses come at a time of difficulties for the Wallingford-based lottery's downtown Hartford operation, as the state Department of Consumer Protection investigates lingering problems in the Connecticut Lottery Corporation's new retail sales system, including technical malfunctions with a Las Vegas-based contractor for online gambling.

"In December, CLC switched sports betting vendors to Fanatics, which necessitated a few weeks of reduced betting options and a brief lull in activity during the week of the change," lottery officials said in a recent statement, following a Hearst Media CT request for financial information under the state's  Freedom of Information Act. One CLC projection estimated as much as $25 million in total sales from the Sports Bar & Fanatics Sportsbook and $3 million in net gaming revenue for the state."

Fanatics signage and branding went up just a few weeks ago and their presence throughout Connecticut will help recognition at the XL Center as well as other locations," CLC officials said. "Though current revenues are lower than initially projected, sales have increased month-over-month throughout the football season and should continue to increase as awareness and the customer base develops."

Michael Freimuth, executive director of the Capital Region Development Authority, said Friday that he also expects a steady turnaround of the operation, as plans for the aging downtown landmark include as much as a $100-million renovation, with $20 million committed by new facility management at the Oak View Group, if the State Bond Commission, led by Gov. Ned Lamont, allocates about $80 million.

"Especially on nights that the UConn men are playing, you can't get into the sportsbook," Freimuth said. "We've been trying a sports bar food beverage concept as an amenity. We wanted to open up to Ann Street. The sportsbook was the gravy on it, and it was a new line of business so we thought we may make a buck. A little bit of it is: we had a distracted vendor. We didn’t get Fanatics until November, which was deep into the football betting season. In some ways we have to get over the learning curve."

Freimuth said the loss could "realistically" reach $600,000 or more by the end of June. "It was hard to project what gaming would be in cold start," he said, noting that early estimates targeted a million dollars a year in net revenue for the XL Center. Fanatics hasn't started marketing and promotions, so the bar is still a relative unknown in downtown Hartford. There are plans to retool the menu and Freimuth expects the facility to take advantage of the remaining football playoffs and NCAA basketball tournament, even if patrons are prohibited from betting on UConn games.

Freimuth said the first bids on improvements to the XL Center are due next week, including a reconfiguration of the arena's lower bowl to include luxury club seating to replace the nose-bleed sky boxes located literally above the lights. Another phase of the three major renovations would increase seating by repositioning the stage area and allowing the venue to compete with larger houses including the Mohegan Sun.

The third crucial rebuild is to replace the narrow, cramped loading dock area that creates major bottlenecks for touring companies that can have as many as 20 tractor trailers full of equipment to load-in and load-out. "We can't turn the trucks around fast enough and the labor to load-out a show is just too high," Freimuth said.

Oh, and the current roof, which famously collapsed under the weight of a January 1978 snowstorm, is now 20 years old, Freimuth added.

During a December report to the CLC’s finance subcommittee, auditors reported total agency revenue of $1.703 billion, an increase over last year by approximately $100 million, “mainly due to the addition of sports betting,” while revenue payments to the state totaled $404.1 million, the second highest in the history of the lottery. Sports betting revenue to the state budget was $1.2 million.

On Friday, Bryan Cafferelli, commissioner of the state Department of Consumer Protection reminded people that as the football playoffs culminate next month, it's against the law to offer sports wagering, including so-called Super Bowl squares in bars and restaurants, outside of the licensed operations.

Sports wagering is limited to DraftKings at Foxwoods; FanDuel at Mohegan Sun; and Fanatics, through their affiliation with the Connecticut Lottery Corporation. The lottery has 10 licensed locations including Arooga's Grille House & Sports Bar in Shelton; Bobby V's in Stamford and Windsor Locks; Shea's in Manchester; Sports Haven in New Haven; Winners in Hartford, New Britain, Milford and Waterbury; and the XL Center.

"As always adults who choose to gamble are encouraged to set time and money limits, and review the resources and information available if you or someone you know has a gambling problem," Cafferelli said in a statement.

Resources and support for problem gambling is available around-the-clock by calling the Connecticut Council on Problem Gambling helpline at 1-888-789-7777, or at the council's website www.ccpg.org. The Department of Consumer Protection, which oversees the lottery and gambling, also has resources on its website.

West Haven tries again to resolve The Haven site; Water Street to remain closed

Brian Zahn

WEST HAVEN — With beach season looming and more traffic expected near the city's shoreline, officials currently have no plans to reopen Water Street.

Water Street, a road parallel to First Avenue, was closed for the expected construction of an outlet mall with water views called The Haven. The development has become a sore spot for residents, as several blocks of shoreline neighborhood — once with the promise of economic development potential to grab commuters off the highway to grow the city's tax base  — have rotted behind a chain-link fence for roughly a decade.

In May 2022, state Reps. Dorinda Borer and Charles Ferraro said a closed-door virtual meeting with the property owner, Simon Property Group, made it clear that the project would not happen and it was in the city's best interest to find a new buyer. Amid several attempts to speed up that process, city officials signaled their willingness to reopen Water Street for summer 2023 when it became clear there would be no construction.

However, months later, the street was still not open. Police commission officials said the city made no efforts to ensure the street was ready for inspection to be deemed safe to reopen; the administration of then Mayor Nancy Rossi declined to comment.

Borer, who was elected as mayor in November, said that nearly two years after Rossi promised to reopen Water Street as part of an "aggressive" suite of actions to force Simon Property Group to move, that the street is not ready for reopening. Borer said there are environmental considerations that must first be considered.

"(W)e need a clean bill of health before any opening could be considered," she said in an emailed comment. "Each demolition permit needs to be properly closed out once the city is satisfied everything was remediated properly. Of the 60 permits, 50 have now been closed out with 10 remaining permits outstanding."

Borer said the city has reached out to Simon for updates on those 10 permits. Those outstanding permits are currently preventing any police or public works inspections from moving forward, she said, and that using the street as "leverage" is more complicated than it seems. Simon Property Group did not respond to an emailed request for comment Friday.

Although Simon Property Group still owns the property, Borer said she has had multiple discussions with them about finding a buyer in her first two months in office.

"I’ve had a number of calls with their Executives to discuss whether they have a potential buyer, the status and the plans for moving forward," she said. "I’ve also asked to partner with them in promoting the site, which they for the first time are open to."

Borer was not available for further comment Friday.

Inflation Has Contractors Taking Pass On Federally-Funded Transportation Project

LUCY PERRY

Construction contractors are between a rock and a hard place: What the Biden administration's IIJA has gifted with a hike in construction work, Buy America policies have taken away by making the work much pricier to perform. Construction costs rose almost 3 percent during the first quarter of 2023, and contractors have seen a 50 percent increase over the past two years. That has the transportation industry nervous for the future.

Last year's National Highway Construction Cost Index (NHCCI) shows it reached "a new all-time high" in the first quarter of 2023. The Bureau of Transportation Statistics (BTS) reported an increase of 2.7 percent from the last quarter of 2022. During the 2.5-year span, second quarter 2022 grew faster than any other period, at 11.9 percent.

BTS also noted that highway construction costs jumped in the last 9 of 10 quarters through the first quarter of 2023.

"Over the 10 quarters, highway construction costs grew 53.8 percent," reported the federal bureau.

Double-Edged Sword

The Biden administration has heavily campaigned the Buy America Act (BABA) with a goal of growing the policy into new areas. A proposed new rulemaking project with a goal of applying BABA to manufactured products is scheduled to be published in April.

"Until the proposal is published, we cannot gauge likely impacts," said Marc Scribner, transportation policy analyst of think tank Reason Foundation. "If the rule is expansive in scope, it is likely to impose significant new construction costs on state departments of transportation."

Scribner said the fed's eagerness to leverage BABA's expansion is "especially unfortunate" for state transportation agencies.

States "have seen highway construction costs increase by 50 percent over the past two years."

Congress imposed BABA procurement requirements for federally funded state highway projects during the Carter administration. The 1978 Surface Transportation Assistance Act made the use of domestic steel, iron and manufactured products mandatory for federally funded projects.

A general waiver was applied back then to products and materials, other than structural steel, used in highway construction.

Scribner said in 1983 Congress find-tuned BABA requirements and maintained the general waiver for manufactured products.

"In doing so, FHWA agreed that it was ‘very difficult to identify the various materials and then trace their origin' in complex manufactured products," he said.

The BABA waiver for manufactured products has held its place on the federal policy books since then.

But labor unions and manufacturers both have opposed the general waiver all this time, citing protectionist issues.

According to Scribner, the anti-trade lobby scored a significant win with IIJA, which included the BABA.

"BABA expressed a general policy preference against any ‘waiver … not limited to the use of specific products for use in a specific project.'"

The Biden administration has applauded the $92 million increase in highway spending that was a major chunk of IIJA.

"Unfortunately, it is increasingly likely that inflation will wipe out the entirety of that funding increase," believes Scribner. "New Buy America requirements on manufactured products will make this problem even worse."

He notes the federal Office of Information and Regulatory Affairs (OIRA) has the impacts of BABA on FHWA projects listed as "undetermined."

Scribner believes this suggests the final rule will determine where annual costs land on the status scale.

It's a matter of whether costs reach $100 million, considered "major" status, or $200 million, "significant" status.

"FHWA could choose to combine any narrowing or repeal of the general waiver with a more robust and permissive product-specific waiver process."

Scribner maintains that policymakers need to understand that in the "real world of budget constraints," cost increases translate to less work.

"Federally mandated cost increases necessarily translate to fewer transportation projects and reduced benefits for Americans," he said. "The best option would be for Congress to reconsider BABA and instead codify a general manufactured products waiver."

This would reduce uncertainty and avoid cost increases associated with the "significant" interpretation of BABA's manufactured products application, he said.

Industry's Perspective

As an example of the tenuous situation, Washington State finds its transportation construction activity hamstrung by construction inflation.

WSDOT advertised a Seattle bridge project with a cost of just more than $800 million. The agency received only two bids, and the lowest was approximately $1.3 billion.

"Such a massive overshoot of the estimated price tag is cause for concern to lawmakers on its own," wrote David Kroman of the Seattle Times.

In July, the state awarded a contract for work on I-405 toll lanes that was $230 million over its estimated price. And a contract for related work on Highway 167 was 40 percent over the estimation. The price to convert three ferries to hybrid-electric went up by $30 million, or 25 percent, according to the Times.

The situation has state lawmakers concerned. Washington is on a "15-year sprint" to build out its transportation network.

"It makes it tough to do all of the projects we've voted on to pass and to do," Sen. Curtis King said. "It makes it tough to meet those promises."

Several factors are at play, including material costs, supply-chain delays — and inflation.

"But WSDOT has raised particular alarm about a trend noticed over the last year and a half: declining competition for large design-build contracts," wrote Kroman.

As recently as 2021, the state averaged more than six bids per project. So far in 2023, that number has dropped to around 2.5, he noted.

"It's certainly a concerning trend because we have a lot of design builds coming up in the next couple of years," said Chris Christopher, WSDOT.

The combined demand for contractors and labor shortages has created a one-two punch in the gut for the state's transportation build-out.

"We've got a lot of large contracts happening and the contractors who are capable … are not as numerous as they need to be," said Sen. Marko Liias.

As a result, the state is considering ways to create more appeal for smaller contractors, including breaking these megaprojects into multiple, smaller contracts.

For now, Rep. Jake Fey proposed rejecting Highway 520 bids and revisiting the details of the project. "We don't have another $500 million laying around."

FHWA's Take On Index Results

It's a situation affecting contractors across the transportation construction spectrum and well beyond Washington State.

In analyzing the latest NHCC index results, FHWA reported that for the second quarter of 2023 a 3.8 percent increase continued from the first quarter.

"Compared to the historical quarterly average of 1.4 percent growth, this is still higher than average inflation," said FHWA.

The agency said the numbers are "less than the high inflation observed during 2021 and 2022, where average quarterly growth was 5.2 percent."

They suggested that elevated inflation in 2021 and 2022 may have been driven by supply chain disruptions and fluctuating oil prices.

"Current trends in the index indicate that as these factors stabilize, the NHCCI may revert to its long-term average."

Overall changes in such construction-related indexes suggests an easing of inflation on material prices, said FHWA.

"Divergence in producer price index [PPI] and NHCCI suggests factors other than material input prices may be contributing to NHCCI inflation," it said.

"Notably, the PPI for asphalt showed a 20.5 percent increase during 2023 Q2 after showing a 22.2 percent decrease during 2023 Q1."

Other construction-related PPI such as materials, concrete products and fabricated structural metal showed modest inflation between 0-2 percent.

"The asphalt price volatility combined with relatively stable prices for other material may partially explain why the NHCCI continues to outpace the PPI."

The Real Numbers, Crunched

The Eno Center noted that when FHWA released its latest cost index, it had to admit construction inflation had not slowed.

In fact, the transportation think tank said, the cost of building highways increased by 3.8 percent in the second quarter of 2023. That figure is equivalent to a 15.3 percent annual inflation rate, said the policy organization.

"This shows that, even though inflation had lessened elsewhere in the economy by that point, it was not yet done with highway construction."

FHWA tracks construction costs quarterly through the NHCC index. In mid-2021, according to Eno, the index began growing rapidly. It peaked in the April-June 2022 quarter, and had a "temporary respite" in the fourth quarter of 2022, after which acceleration began once more.

"Since the end of 2020, the NHCCI says that highway construction costs have increased by 59.3 percent," reported the Eno Center.

The organization is not surprised by the fact that the largest share of the increase was from rises in the cost of asphalt, dictated by the price of petroleum.

"But the second-largest cause of the quarterly increase was from traffic control, which is particularly labor-intensive," said Eno policy analysts.

FHWA concluded that while it's suggested labor costs are a driving factor in NHCCI inflation, the "relatively low and stable inflation" proves inconsistent

"The disparities in growth among the indices underline that each index's sensitivity to broader events varies," said the federal agency.

Those factors include COVID-19 pandemic, supply chain disruptions, material shortages, and oil price swings, FHWA added.

"New FHWA spending obligations in fiscal years 2021, 2022 and the first three quarters of 2023 totaled $152 billion," noted Eno.

The organization suggests re-basing highway construction costs the last quarter of 2020, then deflate everything after that.

The result is that $152 million in new obligations deflates to a "real" total of $116 billion, according to the Eno Center.

The think tank figures that $35.2 billion in real buying power of the IIJA and regular funding has been lost to highway construction cost inflation since then. CEG