Highway & Bridge Construction Market Update Alison Premo Black, PhD ARTBA Senior VP & Chief Economist ARTBA Federal Issues Program May 9, 2016
© 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Real Value of U.S. Highway & Street Construction Work – Rolling 12-month Totals $70
Regaining Ground in 2016: +11% from Mar 2015, -10% from 2009 peak
$65.4 (Dec 2009) $65
Billions of 2016$
$60
$58.4
$55
Real Market Decline: -24% peak to trough
$50
$49.9 (Nov 2013)
$45
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
$40
2007
2008
2009
2010
2011
2012
2013
Source: ARTBA analysis of Census Bureau’s U.S. Value of Construction Put in Place, adjusted for project costs. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
2014
2015
2016
Real Value of U.S. Bridge Construction Work – Rolling 12-month Totals $34
Continued Growth in 2016: +12.5% from Mar 2015
$32
$33.0
Billions of 2015$
$30
$28
$26
$24
$22
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
$20
2007
2008
2009
2010
2011
2012
2013
Source: ARTBA analysis of Census Bureau’s U.S. Value of Construction Put in Place, adjusted for project costs. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
2014
2015
2016
Factors Driving Market Recovery • Stability of five-year FAST Act federal aid highway program funding levels • Increase in state gas tax rates and other revenue sources • Improvement in overall state and local tax revenues • Large projects in major markets, P3 Activity
© 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Challenges to Market Recovery • Recovery state by state is varied, uneven • Congress passed the FAST Act, but did not get the job done • Rising costs faced by state and local governments for K-12 education, healthcare, pensions
© 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Federal Funds, on average, provide 52% of annual state DOT capital outlays for highway & bridge projects Over 70% of state highway & bridge capital outlays
50 to 69% of state highway & bridge capital outlays
30 to 49% of state highway & bridge capital outlays
35% 87%*
53% *
69%* 65%
53% 68%*
52%
71%
60%*
52%
60%*
40%
39%
72%* 50%
56%*
83%*
45%
59%
61%*
69%
43%*
61%* 66%
64%*
83% 67% *
CT 70%
RI 97%*
DE 42%*
NJ 31%*
MD 45%*
DC 52%*
47%*
65%
66% * 41%
60%
VT 80% MA 41%
41%
72% 46%
55%
NH 58%*
66%*
49%
89%* 36% HI 77% Source: ARTBA analysis of FHWA Highway Statistics data, total ten year average 2004-2013 from tables SF-1 and SF-2. The percent is the ratio of federal aid reimbursements to the state DOT and total state DOT capital outlays and is indicative of the importance of the federal aid program to state capital spending for highways and bridges. Does not include local capital spending. Federal highway reimbursements from FHWA are primarily used for capital outlays, including construction, right of way and engineering, but are also used for debt service for GARVEE bonds. FHWA payments go directly to state DOTs. * States that have issued GARVEE bonds before 2013.
FAST Act Highway Investment Impact $47 $46.4
$46
Billions of dollars
$45 $44 $43 $42.0
$42
$41.3
$41 $40
$40.3
$39 $38 $37 2015
2016
Nominal Obligations
2017
2018
Adjusted for Project Costs
2019
2020
Adjusted for Inflation
Source: ARTBA analysis of FAST Act. Inflation forecast from CBO's August 2015 report "An Update to the Budget and Economic Outlook: 2015 to 2025.“© 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Average Annual FAST Act Funding by State (in millions) Less than $400 million
$400-600 million
$600 million- $1 billion
Over $1 billion NH $175
$718 $435
$196
$263 $691
$529 $303
$797
$299 $306 $3,888
$385
$368 $566 $400
$521
$1,738 $1,420 $1,009 $1,506 $463
$1,003
$1,078
$704
$389
$672
$548 $512 $804
$3,656
$531 HI $179
$743
CT $532
RI $232
DE $179
NJ $1,058
MD $637
DC $169
$1,105
$895 $775
MA $643
$1,778
$1,115
$271
VT $215
$709 $1,368 $2,007 $
Source: ARTBA analysis of FAST Act. Original data from FHWA. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
www.transportationinvestment.org
26 States & D.C. Have Increased Motor Fuel Related Taxes 43 Times Since 1997
WA
ME MT
ND
OR
MN ID
NH
NY
WI
SD
PA
IA
NE NV
VT
MI
WY
IL
UT
IN
CO
OH CT
WV KS
CA
MO DE
OK
SC
AR
MD DC
MS
AL
GA
AK TX
NJ
NC
TN NM
RI
VA
KY AZ
MA
Increase Prior to 2013
LA
FL HI © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Increase Approved in 2013-2015
Index of State Tax Collections 125
Motor fuel tax collections up 23% from 2012 in states that passed gas tax increases in 2013.
Index of Tax Collections
120
123
115 111 110
110 105
103 100
100
95 2012
2013
Gas Tax Revenues: MA, MD, PA, VA, VT, WY All Tax Revenues: MA, MD, PA, VA, VT WY
2014
2015
Gas Tax Revenues: All other states All Tax Revenues: All other states
Source: ARTBA analysis of Census Bureau data, State and Local Tax Revenues. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
How Real State Gas Tax Revenue Collections and Highway/Bridge Contract Awards Compare in 2015 to pre-recession 2008 Levels Gas tax revenues & awards up
Gas tax revenues down, awards up
Gas tax revenues & awards down
Gas tax revenues up, awards down
WA
NH MT
ME
ND MN
OR
VT
ID
WI
SD
NY MI
WY
PA
IA
NE NV
CT
OH
UT
CA
MA
IL
CO KS
IN
RI
WV
MO
VA
KY
DE NJ
NC AZ
OK
NM
TN AR
SC MS
AL
MD
GA
TX LA
AK
FL HI
Source: ARTBA analysis of U.S. Census Bureau data on state motor fuel tax collections, adjusted with the Consumer Price Index, and highway and b ridge contract awards from Dodge Data Analytics, adjusted for project costs with the ARTBA Price Index. Comparison is of annual 2015 data with 2008 data. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
States To Watch in 2016 and Beyond Considering Revenue Increase in 2016 Discussing Revenue Increase Beyond 2016
WA MT
NH ME
ND MN
OR
VT
ID
WI
SD
NY MI
WY
PA
IA
NE CA
CT
OH
UT
NV
MA
IL
CO KS
IN
RI
WV
MO
VA
KY
DE NJ
NC AZ
OK
NM
TN AR
SC MS
AL
GA
TX LA
AK
FL HI
© 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
MD DC
Real Value of State & Local Govt. Contract Awards Major Projects Driving Recent Gains in Highway & Bridge Awards $90 $80 $70 $60
FL, TX & IN projects account for 2/3 of 2014 to 2015 increase
TX, NY & KY projects account for 2/3 of 2012 to 2013 increase
$62.8
$65.7
$63.0 $57.8
$56.6
$63.4 $56.9
$52.9
$50 $40 $30 $20 $10 $0 2008
2009
2010
2011
2012
2013
Source: ARTBA analysis of data from Dodge Data Analytics, adjusted with the ARTBA Price Index for project costs. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
2014
2015
States That Brought P3 Projects to Financial Close in 2014-2015 Highway/Bridge
Transit/Rail
Highway, Bridge &Transit
WA
NH MT
ME
ND MN
OR
VT
ID
WI
SD
NY MI
WY
PA
IA
NE UT
NV CA
MA
IL
CO KS
CT
OH
IN
RI
WV
MO
VA
KY
DE NJ
NC AZ
OK
NM
TN AR
SC MS
AL
GA
TX LA
AK
FL HI
Source: ARTBA Research, Public Works Financing Newsletter. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
MD DC
States With Major P3 Projects In the Pipeline Highway/Bridge
Transit/Rail
Highway, Bridge and Transit
WA
NH MT
ME
ND MN
OR
VT
ID WI
SD
NY MI
WY
PA
IA
NE
CT
OH
UT
NV
MA
CA
IL
CO KS
IN
RI
WV
MO
VA
KY
DE NJ
NC AZ
OK
NM
TN AR
SC MS
AL
DC
GA
TX LA
AK
FL HI
Source: ARTBA Research, Public Works Financing Newsletter. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
MD
The Highway Trust Fund Revenue Crisis Will Return $70
Billions of dollars
$60 $50
$52.0 $53.0
$55.0 $56.0 $56.0
$63.0 $61.0 $62.0 $60.0 $58.0 $59.0 $59.0
$41.0 $41.0 $42.0 $42.0 $42.0 $42.0 $41.0 $41.0 $41.0 $40.0 $40.0 $40.0
$40 $30 $19.0 $19.0
$21.0 $22.0
$25.0
$20 $10
$2.0
$0 2015 2016 2017
2018 2019 2020 2021
Total HTF outlays
Proj. HTF revenues
2022 2023 2024 2025
Shortfall after FAST Act transfers spent
Source: Congressional Budget Office Highway Trust Fund baseline, January 2016. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
2026
Continued Challenges for State & Local Finances • State budgets are improving, but progress has been slow and uneven • State governments face significant financial challenges going forward • Spending requirements on education, healthcare and other areas continue to grow at faster rates than state revenue growth. • Long-term critical challenges include pent-up demand for spending on infrastructure and rising pension and health care costs. Source: National State Association of Budget Officers, Fall 2015 Fiscal Survey of States. © 2016 ARTBA. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of ARTBA.
Alison Premo Black Senior Vice President & Chief Economist American Road & Transportation Builders Association
[email protected] @APremoBlack 202-289-4434
