Inflation taking bite out of new infrastructure projects

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 of a foot of water pipe in Tucson, Arizona: up 19%. The cost of a ton of asphalt in Huntington, Massachusetts: up 37%.

The price hikes already are diminishing the value of a $1 trillion infrastructure plan President 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.

“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.

In the Western Mass town of Huntington, 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.

Inflation has affected the entire U.S. economy. 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.

But prices for key materials in infrastructure construction have risen even more. Asphalt 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.

When Tucson, Arizona, launched the first part of a four-phase water main replacement project in September 2020, 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.

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

Tacoma, Washington, is also 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.

Public utilities 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.”