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CT Construction Digest Monday June 20, 2022

Inflation taking bite out of new infrastructure projects


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

Inflation is taking a toll on infrastructure projects across the U.S., driving up costs so much that state and local officials are postponing projects, scaling back others and reprioritizing their needs.

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

“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%, by 30%, 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% 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.

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% 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% 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%, and ductile iron pipes and fittings — used by water systems — were nearly 25% 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.

U.S. 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 driving inflation, which is cutting down on the projects that they’re actually wanting to do,” said Graves, a Missouri Republican who voted against the infrastructure bill.

White House senior adviser Mitch Landrieu said the infrastructure law “actually positions us for lowering costs for families in the short- and long-term." He pointed, among other things, to made-in America requirements for steel, iron and other construction materials that could strengthen supply chains and thus lower costs.

Officials at Des Moines International Airport were counting on the federal infrastructure money to replace an aging terminal with a modern structure. Four years ago, a new 14-gate terminal was projected to cost about $434 million and be open by 2026. By this spring, the cost had soared to $733 million.

That’s more than the airport can afford, even with the federal aid. So officials are planning to break the project into phases, building just five new gates by 2026 at a cost of $411 million.

“If inflation continues, it may be a decade before the project gets completely done,” airport Executive Director Kevin Foley said.

Other projects also have been rocked by inflationary price hikes.

Since voters approved a property tax increase in 2020, the estimated cost of building two light rail lines and a tunnel through Austin, Texas, has gone from $5.8 billion to $10.3 billion. Doubling the tunnel length was a big factor. But inflation and surging real estate prices also fueled the increase, forcing officials to consider cutting costs or lengthening the time frame for completing the project.

“It’s been a challenge,” said David Couch, chief program officer at the Austin Transit Partnership.

Low bids for a series of bridge repairs along Interstate 55 in St. Louis came in at $63 million this year, 57% over the budgeted amount. Overall, Missouri’s highway construction costs for the fiscal year ending in June were $139 million over budget — an 11% increase that marked a “pretty significant swing” from several under-budget years, said state Department of Transportation Director Patrick McKenna.

Though Missouri forged ahead with this year's projects, inflation “will take a bite out of the future,” McKenna said.

Inflation has carried more immediate consequence in some places.

When bids for a road project in Lansing, Michigan, came in 60% above estimates, the city rebid the project and cut its scope in half, said Andrew Kilpatrick, public service director and acting city engineer.

In Huntington, Massachusetts, a 1.5-mile stretch of road won't be finished this year after a 37% spike in the price of liquid asphalt increased the cost for paving a mile to about $140,000. The town gets $159,000 annually in state funding for its roads, highway superintendent Charles Dazelle said.

“Right now, one mile of road, that’s one year. That is doing nothing else,” Dazelle said.

Public water systems across the country also are straining under inflation.

When Tucson, Arizona, launched the first part of a four-phase water main replacement project in September 2020, ductile iron pipe cost $75-a-foot and a gate valve cost $3,000. When it bid the most recent phase this spring, pipe costs had risen to nearly $90-a-foot and gate valves to nearly $4,100. The city is now prioritizing what other projects it can afford, and which ones have to wait.

“To sum it up, we’re doing less work for the same amount of money,” said Tucson's chief water engineer, Scott Schladweiler.

The city of Tacoma, Washington, also is altering some of its planned water main replacements because of rising costs.

“Some of them are getting delayed, some of them are being reduced in scope, and it’s forcing us to re-evaluate some of the budgets that we’ve set forth,” said Ali Polda, principal engineer in the city's water department.

Residents in a neighborhood west of Little Rock, Arkansas, will pay a $146 monthly surcharge to Central Arkansas Water to install new water lines. The charge is 17% more than originally planned because of spikes in construction costs.

Other public utilities also will have to choose between scaling back work and passing along costs to customers, said Michael Arceneaux, acting CEO of the Association of Metropolitan Water Agencies.

“In the end, it’s going to be the rate payers that suffer,” he said, "because the projects have to get done, and funding will have to come from the rate payers.”

Trumbull set to start work on Route 111 signal, safety upgrades

Amanda Cuda

TRUMBULL — Construction is slated to start soon on the relocation of the Pequonnock River Trail crossing on Route 111. The long-anticipated project would, among other things, installing a traffic light at the commercial plaza that’s home to Prime One Eleven and The Edge fitness.

“Improving safety in this area has been a top priority of mine since I came to office,” First Selectman Vicki Tesoro said in a written statement. “I am thrilled to have this construction get underway. These changes will be better for residents, visitors and businesses in the area.”

The town received approval for the project from the Connecticut Department of Transportation earlier this year and the project will be funded through a $1.6 million grant from the Local Transportation Capital Improvement Program.

As part of the project, the Pequonnock River Trail will be redirected to the new light and a new crosswalk will be installed. Officials have said traffic is heavy in that area and has caused problems in the past. According to a news release from the Town of Trumbull, the early construction will involve preparing the area and the trail relocation.

Though the traffic light equipment has been ordered, officials report that it might be delayed by “supply chain issues,” but it will be installed when it’s received.

Officials had originally said the project could be completed by late fall, but, due to the supply issues, that timeline may have shift, said Rina Bakalar, Trumbull economic and community development director.

Bakalar said the project will ultimately be a positive thing for those who live and work in the region.

“Improving the safety, walkability and connectivity in this area will be a positive for the businesses and certainly residents,” she said. “Increasingly, people want to be able to go out on foot and enjoy recreation and amenities. This project achieves this for the area.”

Residents and businesses in the region will be made aware of any construction activity that could affect traffic through the town’s web site, www.trumbull-ct.gov.

101-unit apartment conversion at former Travelers training center in Hartford gets CRDA backing

Michael Puffer

The Capital Region Development Authority board on Thursday agreed to loan $3 million toward an $18.7 million conversion of the former Travelers training center at 200 Constitution Plaza into 101 apartments.

Biagio Barone of Stratford-based Barone Properties has teamed up with John Guedes, president of Bridgeport builder Primrose Cos. for the redevelopment of the roughly 125,000-square-foot, five-story, concrete building on the northeastern edge of downtown Hartford.

“We felt it was a great location,” Guedes told the Hartford Business Journal. “We really believe the new wave of development is downtown areas, especially for young professionals and empty nesters.”

Meeting Thursday, the CRDA Board of Directors unanimously endorsed the request, which now requires the blessing of the Connecticut State Bond Commission. Barone and Guedes will have to secure the remainder of finances before tapping CRDA funds. They have also agreed to hold 10 units as affordable for 15 years.  

The project’s financing plan calls for $13.7 million in conventional financing, $2 million in equity and $3 million from the CRDA.

The office building at 200 Constitution Plaza has been empty for about a decade, CRDA Executive Director Michael Freimuth said.

Trinity College paid $2 million for the building in 2014 for a widely touted expansion into downtown Hartford that didn’t pan out. Four years later, the building sold to its current owner, 200 CP Holding LLC., for $2.6 million. The principal of the current owner is Aaron Berger, of Monsey, New York.

Guedes said 200 Constitution Plaza will cost $4.5 million to acquire for the currently planned project.

The target property is adjacent to the 250,000-square-foot “Spectra Plaza” building, a former hotel converted into 193 apartments in a $23.6 million project that wrapped up in 2016. That project was completed by New York-based partners Wonder Works Construction and Girona Ventures and is nearly fully occupied at present.

Guedes said apartments at 200 Constitution Plaza will be larger than those in the neighboring building. In a nod to the trend of working from home, the apartments will include enough space for an office, he said.

“Instead of using their kitchen table or their living room, they have an additional room that’s an office,” Guedes said. “If they don’t use it as an office, it can be used as a den.”

The conversion plan calls for 24 one-bedroom, 28 two-bedroom and 49 studio apartments. There will be lounges, a fitness room and an 150-seat auditorium will be preserved. That could be used by one of the colleges and provide entertainment space for residents, Guedes said.

Guedes said the building will be gutted for the remodel. 101 windows will also be replaced as the current windows do not open. He expects to begin demolition within a few weeks of purchase and said the new apartments would become available before the end of summer 2023.