By {{Article.AuthorName}} | {{Article.PublicationDate.slice(6, -2) | date:'EEEE, MMMM d, y'}}
{{TotalFavorites}} Favorite{{TotalFavorites>1? 's' : ''}}

Things were already dicey for the U.S. infrastructure market going into 2020. The looming insolvency of the Highway Trust Fund and numerous failed local tax measures had many, if not most, states urgently lobbying for additional federal funding.

Those concerns turned to sheer panic during the “new normal” of the global pandemic, as local funding sources dropped precipitously and states struggled to balance budgets. 

Anirban Basu, chairman and CEO of Sage Policy Group in Baltimore, as well as chief economist for Associated Builders and Contractors, says it’s difficult to forecast what 2021 might look like “with any precision” in the current environment, but it’s undoubtedly a bleak picture for projects relying solely on public dollars. “We’re seeing the confluence of COVID-19, the federal government’s failure to find new funding mechanisms, and the imminent insolvency of the Highway Trust Fund,” Basu says. “Something has got to give.”

The Trust Fund, which receives money from the federal fuel tax of 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel, could soon become insolvent without a tax increase or an additional funding mechanism. “The result is an astonishing level of uncertainty regarding the future of federal highway funding,” Basu says.

Before, worries about the Trust Fund were less severe, as state and local governments could more easily generate their own financing. That’s all changed, and states are hesitating to take on additional debt. It’s not a unique problem—there are similar worries in the flood control, stormwater management and water services sectors—but surface transportation has the largest funding gap by far.

But Basu says there is a silver lining. “There should be an appetite for additional stimulus money in 2021, as the economy will still be reeling from the pandemic. The politicians can’t simply stand still and do nothing. One is tempted to presume that early in the next administration there will be a sizeable infrastructure package at last emerging from the federal government.” 

As a temporary fix, Congress recently extended funding for federal government programs into Fiscal Year 2021, including a one-year extension of the FAST Act. The bill also transfers $10.4 billion to the Highway Account and $3.2 billion to the Mass Transit Account of the Highway Trust Fund to maintain solvency through FY 2021.

That provides market stability and avoids short-term disruptions, but it doesn’t significantly increase funding above current levels or include any emergency “backstop funding” for DOTs or transit agencies. It also fails to address long-term Trust Fund issues or pandemic-induced declines in state funding. 

“It will provide some stability to the markets and avoid short-term disruptions. That’s what it was intended to do,” says Jim Meads, president and CEO of Sain Associates, a Birmingham, Alabama, engineering firm. Meads is also a member of the American Council of Engineering Companies’ Transportation Committee. “At a minimum, that’s what most transportation stakeholders have been wanting, as it gives state transportation departments the ability to plan for the coming year.”

For most states, however, it’s not a sustainable solution. Shawn Wilson, secretary of Louisiana’s Department of Transportation and Development in Baton Rouge, says his agency desperately needs additional resources and funding. “In order to continue preserving our existing roadways and building new roadway systems, we must have a reliable and steady revenue stream,” Wilson says in a Sept. 15 public statement. “The state relies on a 20-cent gas tax to address infrastructure needs. After this, remaining revenue goes to the Transportation Trust Fund to address our current needs, which has lost more than 50% of its value since it hasn’t changed since the 1980s.

“Without a steady revenue stream, new projects will be few and far between as the funding from the 1986 gas tax will be primarily used to maintain the system that is already in place,” Wilson continues.

Basu says any long-term funding measure at the federal level will need to include a transformative overhaul of the Trust Fund. A flat fuel tax simply won’t work in the long term, as it doesn’t account for fluctuations in driver miles or the proliferation of fuel-efficient cars. “On top of that, the roads are being pummeled by larger fleets of trucks and more extreme weather,” he adds.

But while Congress is certainly aware of the problem, they’re unlikely to make any big changes in the near term. “When they begin to run out of money, they simply take money from the general fund, shove it into the Highway Trust Fund and call it a day,” Basu says. As a result, national debt increases while no new revenue streams are identified for infrastructure. 

“They’ll simply wait for the next moment of crisis,” he adds. “It’s quite conceivable that that’s what will happen in 2021.”

There are other challenges facing the highway industry in 2020. Alabama’s Meads says the pandemic has made it difficult for most DOTs to project future highway needs, as traffic volumes have fluctuated wildly throughout the year. “We do a lot of traffic engineering work, and one of the struggles right now is determining what we use as our base data,” Meads says. “We can’t do traffic counts right now because it’s not considered reliable data.”

The industry is also adapting to sweeping changes to the 50-year-old National Environmental Policy Act (NEPA). On July 16, the Council on Environmental Quality (CEQ) finalized the act’s overhaul, making changes to nearly every section of the regulations (they were last comprehensively updated in 1978). The new procedural provisions took effect on Sept. 14, 2020, and will have a significant impact on engineering firms performing environmental reviews on highway projects.


Despite pervasive funding uncertainty, many highway contractors continue to ride a wave of projects that were already in the queue when the pandemic hit. That’s especially true in states benefiting from their own local tax measures. 

Meads says it’s been a good year in Alabama, and he has yet to notice a decline in his backlog of projects mainly because of the state’s increase in gas tax funding. The state passed the Rebuild Alabama Act in 2019, which raised the gasoline and diesel taxes by 6 cents a gallon in September 2019 and another 2 cents on Oct. 1, 2020, and Oct. 1, 2021, respectively. The 10-cent increase is expected to raise more than $300 million a year for road projects.

However, many of his city and county clients are experiencing decreases in revenues. “It’s going to be interesting to see how funding will be affected (in 2021),” he adds. “There are so many large capacity projects that simply can’t be funded because there’s not enough money.”

In Texas, Brian Lindsey, vice president of Brannan Paving Co., says his company’s volume of chip seal maintenance work is actually increasing, mostly due to highway tax initiatives passed there over the last decade. Texas voters approved Proposition 1 in 2014 to provide $1.7 billion in funding per year; and Proposition 7 in 2015—with an incredible 86% voter approval—to  provide as much as $2.5 billion in funding per year if thresholds for sales and use tax revenues are reached.

That’s translated into a business boom for the Victoria, Texas-based company, which is one of the largest chip seal contractors in the state. The contractor places about 1,200-1,500 lane miles of the product a year, with about 95% of the work funded by TXDOT. “There is currently about $300 million worth of chip seal work, and they’re forecasting that to hit about $320 million next year,” he adds.

Chip seal is the most popular method for maintaining roads in Texas, as TXDOT can get “more miles for the money” when compared to a traditional overlay, Lindsey says. That’s important in a state with such a large geographical footprint. “We probably do more chip seal in a year than all 49 states put together,” he says. 

Jim Dacey, a founding owner of Doli Construction Corp. in Chalfont, Pennsylvania, says he hasn’t noticed a huge impact to his work volumes either. Doli Construction entered the bridge market approximately three years ago as a subcontractor to Walsh Group of Chicago. Today, Doli performs most of its own work, typically constructing box culvert bridges.

If the market takes a downturn, Dacey says he’ll roll with whatever comes his way and “get lean” if needed. As for 2020, “it hasn’t been a problem for us. There’s still a lot of work out there and everyone has been busy.”

For now, Doli works within a 150-mile radius of its home base and is in the process of completing its first deck bridge. “Managing and providing our workers with a safe workplace so they can return home to their families every day remains our number one priority,” Dacey says. 

Nevertheless, the market hasn’t been “picture perfect” during the pandemic. Brannon’s Lindsey has noticed a drop in job applicants. Additionally, the supply chain has been significantly impacted by a worsening truck driver shortage, which raises the cost of a project as it leads to delays with aggregate and asphalt deliveries. “A lot of the older truckers are retiring,” Lindsey says. “It’s a huge problem right now, and we’re bringing that up to TXDOT right now.” 


Meanwhile, some states are experimenting with alternative funding mechanisms to fill the funding gap—Public Public-Private Partnerships (P3s) top the list—but with decidedly mixed results. 

In the suburbs of Washington D.C., a P3 was formed to construct the $2 billion Purple Line light rail project, but later fell apart when the private sector component of the partnership vacated the agreement. Maryland transit officials are still trying to reach a settlement with Purple Line Transit Partners, the concessionaire managing the broader project, amounting to over $800 million in delay-related cost overruns. It could be Spring 2021 before a revised construction plan comes into focus for the disputed project. 

And in Mobile, Alabama, the Alabama Department of Transportation was forced to remove the $2 billion I-10 Mobile River Bridge and Bayway project from its 2023 Transportation Improvement Plan following local opposition to the P3 approach. Many residents criticized the arrangement that ALDOT proposed to structure the project’s financing.

Basu says these problems signal a systemic problem with P3s. “Some people talk about P3s as a panacea, and that they will solve all of our infrastructure issues, but that’s not the case,” he adds. “It needs to be able to generate revenue. If there’s no revenue stream, then it’s not a relevant solution.” 

He says other funding models have been more successful, such as the incorporation of user fees in Virginia, Texas and other states. “They’re experimenting with fee-based High-Occupancy Toll lanes,” Basu says. “If congestion is severe and one wants to get on a special lane that is tolled, they can pay extra. It enables them to offer a higher quality of service, while getting more revenue in the process.” He admits, however, that it does little to raise funding for transportation needs outside of municipal areas. 


 Comments ({{Comments.length}})

  • {{comment.Name}}


    {{comment.DateCreated.slice(6, -2) | date: 'MMM d, y h:mm:ss a'}}

Leave a comment

Required! Not valid email!