by Mike Skinner, P.E., Director of Engineering, CAPA
With trillions of dollars lost across the global economy within the last few months, economic recovery is the world’s top priority. In early spring, the United States had the strongest economy in its history with record unemployment and the highest stock market recorded. However, within two months of the virus, in the United States alone there were over 25+ million unemployed and small businesses shuttered (the backbone of the American economy) with many unable to recover from the financial devastation.
Around the Industry
On April 21, the New York Times ran a story about the other global financial crisis that was doubling down on America’s ability to maintain its economic viability. “On Monday the benchmark price for crude oil in the United States fell to negative $37.63. Over the last six weeks, demand for products refined from oil has collapsed. With far fewer airplanes flying, airlines need less jet fuel. People aren’t driving, so they need less gasoline. But oil producers have been slower to cut back production and have been impacted with more capacity to pump oil out of the ground than there is demand for at present, and inadequate storage capacity.”
However, here in Colorado the situation is different due to the fact that we are a net exporter of liquid asphalt out of Colorado across the region. Local producers have been able to significantly reduce their gasoline, diesel and jet fuel production to address lowered demands while still maintaining 100% of their current asphalt production with no foreseeable asphalt supply issues this year.
Around the Country
A challenge that CDOT and our industry is facing, is the decline in transportation revenues generated from the Highway Users Tax Fund (HUTF) across the United States and the impact that may have on the broader road construction industry resulting in more job losses. According to the American Association of State Highway Transportation Officials (AASHTO), every state is expected to encounter challenges in delivering their capital highway construction program as a result of an estimated 30 percent decline in
transportation revenues. Based on this estimate, AASHTO is requesting $16.7 billion for the remainder of FY 2020 and $33.3 billion for FY 2021. Nearly 40 percent of the states surveyed by AASHTO indicated that emergency relief is needed now, and the National Asphalt Pavement Association has received reports from state DOTs postponing or cancelling planned highway project bid lettings across the country.
While the immediate infusion of Federal revenue is needed to preserve states’ employee workforce and maintain the highway program in the near term, Congress is also challenged with the fact that the current highway bill authorization, known as the FAST Act, expires in September of this year, only six months away. NAPA called on Congressional leaders to enact a multi-year reauthorization bill of at least five years
and significantly increase investments that will improve the condition and performance of the National Highway System.
Around the State
On April 16, CDOT’s Executive Director gave a briefing to the Transportation Commission during their Budget Workshop. She stated that COVID-19 is resulting in revenue reductions and program cuts are expected, highlighting that “ in an economic downturn, simpler projects that are ready to go tend to be most effective in creating and saving jobs and supporting businesses.” Staff’s recommendation to close the revenue gap is to maintain the ‘CDOT’s base program’ and preserve as much of the planned rural paving program (simpler projects) as possible.
CDOT also faces additional revenue challenges in the form of previously approved Senate Bill 267 funded projects. Five SB267 2020 construction projects that have been bid but not yet awarded (totaling over $100M) have been put on hold as the state Treasurer is delaying the sale of the revenue bonds due to the financial market uncertainty. This reduction in operating funds now creates less flexibility for CDOT and puts transfer of general funds to projects in jeopardy.
It appears we may be seeing some light at the end of the Covid-19 tunnel. Governor Polis has issued a new three-phase process that provides guidance on going back to work and opening up the Colorado economy. He has commissioned an economic recovery effort with an infrastructure committee that will look at the opportunity of transportation projects to stimulate the economy.
The Colorado Transportation Commission continues to provide direction on budget changes, funding scenarios, and awarding projects. CAPA is working on a plan to reopen the LabCAT/RMAEC and address the backlog of technicians who need to be certified or recertified. Meanwhile, paving projects are underway around the state kicking off the 2020 construction season. Stay safe and stay healthy.