Virginia has $694 million of federal stimulus dollars on its way to fund highway construction projects. As you read this a slew of governmental bodies are hammering exactly how it will be spent.
But how much of an impact will that really have on the state’s transportation infrastructure when the state has $3 billion worth of stalled projects on its plate?According to VDOT, the first $250 million will primarily be aimed at upgrading bridges, repaving roads, and improving roads around the state’s rapidly growing military bases. BizSense chatted with Jeffrey Southard, executive vice president of the Virginia Transportation Construction Alliance, about how much of an impact the money will really have on both the state’s infrastructure and its highway construction industry.
Below is an edited transcript.
Richmond BizSense: Will the federal stimulus money for transportation boost the industry and save jobs?
Jeffrey Southard: Absolutely, it will save jobs and create new jobs. One of the things you have to remember, in the last year VDOT has cut $3 billion out of its 6 year construction program. While this does not nearly make up for what has been delayed or cut, it is a very important influx of money for the construction industry.
RBS: How long it will it take for the money to flow into the industry?
JS: It will be by the end of April at the earliest before we see payments come to contracts. We’ll see much more in May or June. It’s important to note that there has not been any substantial funds dedicated funding since 1986. Consequently we find ourselves in a terrible situation. The governor has twice introduced legislation to create a billion dollars a year in new funding, and the General Assembly hasn’t passed anything.
RBS: Because of the limited number of projects that will be funded, is the bidding process more competitive?
JS: We are right in the middle of seasonal layoffs; one of the questions is will there be enough money coming in to keep them from becoming permanent layoffs? Then you have companies that have gone out of business, or allocated resource to other states. Some are now choosing not to do Department of Transportation (DOT) work. We have had companies because of the unreliability of it, they have started to do only 40 percent DOT work, and are doing other types of work instead.
In the short term, we think it will be very competitive. We will have to see in the long term if companies in the industry can survive at the level it is at in.
RBS: How much downsizing and lay offs has already taken place within the industry?
JS:I don’t know an exact number, but there has been hundreds and hundreds of jobs lost. I don’t know any aspect of our business that hasn’t had lay offs including aggregate producers, engineering firms, and equipment producers.
You have to remember this stimulus money is short term. If the Virginia legislature doesn’t address the funding crisis, how many of these business 18 months from now are going to be in the same situation we are in now? In one sense we will be worse off because this is going to give everyone an artificial sense that all the work is being done.
RBS: How big of an impact will the stimulus have on the state’s transportation infrastructure?
JS: We have situation in Virginia where there are 8,000 obsolete or structurally deficient bridges. It will cost $3 billion to fix all of those. With the first round of this stimulus money the state is planning to do work on a 100 and 120 bridges, so that is only one and half percent of what needs to be done just in terms of bridges.
This money is going to be gone in a year and half, and in light of what has been cut it’s not that much money. When you cut $3 billion over six years, one injection of $700 million doesn’t get you very far.
RBS: Why does the state have a transportation funding problem in the first place, and what solutions does the VTCA support?
What we pay to travel on roads in Virginia hasn’t increased in 23 years. We still pay the same gas tax we did 23 years ago, and as our cars get more fuel efficient we are driving on the highways and paying less than we did 23 years ago. The gas tax of 1986 has a buying power to day of less than 40 percent, so for every million dollars that might have produced we have $400,000. Meanwhile the cost of maintaining the roads has increase 80 percent. We have to charge people what it costs to travel on the roadways. We can do that through vehicle registration, tolls, gas tax, mileage fees, but we cannot expect to have a 21st century transportation system based on a funding scheme that was created in 1986.
The situation we face now when we read about service level cuts and roads not being paved and improved—as my grandfather used to say, “The chickens have come home to roost.”
The problem that those of us in the industry have warned everybody about for 8 years are now here, what we are facing is transportation funding crisis.
While the stimulus funding will provide Virginia with a substantial amount of money, it’s a one time fix, and 18 months from now we will be in the same situation we are in today unless the legislature can come to agreement.
Al Harris is a BizSense editor. Please send story ideas to [email protected].
Virginia has $694 million of federal stimulus dollars on its way to fund highway construction projects. As you read this a slew of governmental bodies are hammering exactly how it will be spent.
But how much of an impact will that really have on the state’s transportation infrastructure when the state has $3 billion worth of stalled projects on its plate?According to VDOT, the first $250 million will primarily be aimed at upgrading bridges, repaving roads, and improving roads around the state’s rapidly growing military bases. BizSense chatted with Jeffrey Southard, executive vice president of the Virginia Transportation Construction Alliance, about how much of an impact the money will really have on both the state’s infrastructure and its highway construction industry.
Below is an edited transcript.
Richmond BizSense: Will the federal stimulus money for transportation boost the industry and save jobs?
Jeffrey Southard: Absolutely, it will save jobs and create new jobs. One of the things you have to remember, in the last year VDOT has cut $3 billion out of its 6 year construction program. While this does not nearly make up for what has been delayed or cut, it is a very important influx of money for the construction industry.
RBS: How long it will it take for the money to flow into the industry?
JS: It will be by the end of April at the earliest before we see payments come to contracts. We’ll see much more in May or June. It’s important to note that there has not been any substantial funds dedicated funding since 1986. Consequently we find ourselves in a terrible situation. The governor has twice introduced legislation to create a billion dollars a year in new funding, and the General Assembly hasn’t passed anything.
RBS: Because of the limited number of projects that will be funded, is the bidding process more competitive?
JS: We are right in the middle of seasonal layoffs; one of the questions is will there be enough money coming in to keep them from becoming permanent layoffs? Then you have companies that have gone out of business, or allocated resource to other states. Some are now choosing not to do Department of Transportation (DOT) work. We have had companies because of the unreliability of it, they have started to do only 40 percent DOT work, and are doing other types of work instead.
In the short term, we think it will be very competitive. We will have to see in the long term if companies in the industry can survive at the level it is at in.
RBS: How much downsizing and lay offs has already taken place within the industry?
JS:I don’t know an exact number, but there has been hundreds and hundreds of jobs lost. I don’t know any aspect of our business that hasn’t had lay offs including aggregate producers, engineering firms, and equipment producers.
You have to remember this stimulus money is short term. If the Virginia legislature doesn’t address the funding crisis, how many of these business 18 months from now are going to be in the same situation we are in now? In one sense we will be worse off because this is going to give everyone an artificial sense that all the work is being done.
RBS: How big of an impact will the stimulus have on the state’s transportation infrastructure?
JS: We have situation in Virginia where there are 8,000 obsolete or structurally deficient bridges. It will cost $3 billion to fix all of those. With the first round of this stimulus money the state is planning to do work on a 100 and 120 bridges, so that is only one and half percent of what needs to be done just in terms of bridges.
This money is going to be gone in a year and half, and in light of what has been cut it’s not that much money. When you cut $3 billion over six years, one injection of $700 million doesn’t get you very far.
RBS: Why does the state have a transportation funding problem in the first place, and what solutions does the VTCA support?
What we pay to travel on roads in Virginia hasn’t increased in 23 years. We still pay the same gas tax we did 23 years ago, and as our cars get more fuel efficient we are driving on the highways and paying less than we did 23 years ago. The gas tax of 1986 has a buying power to day of less than 40 percent, so for every million dollars that might have produced we have $400,000. Meanwhile the cost of maintaining the roads has increase 80 percent. We have to charge people what it costs to travel on the roadways. We can do that through vehicle registration, tolls, gas tax, mileage fees, but we cannot expect to have a 21st century transportation system based on a funding scheme that was created in 1986.
The situation we face now when we read about service level cuts and roads not being paved and improved—as my grandfather used to say, “The chickens have come home to roost.”
The problem that those of us in the industry have warned everybody about for 8 years are now here, what we are facing is transportation funding crisis.
While the stimulus funding will provide Virginia with a substantial amount of money, it’s a one time fix, and 18 months from now we will be in the same situation we are in today unless the legislature can come to agreement.
Al Harris is a BizSense editor. Please send story ideas to [email protected].
Do the projects get re-priced with the current market value of labor. I don’t think tax dollars should be spent on projects that used bids from before the construction bust. Labor and materials were in the housing and real-estate bubble. The cost for these items is down and any project bid on before September 2008 doesn’t reflect this. I understand money is tight for everyone but I am upside down I my home and I put 20% down. I got a quote to redo a bath in July of last year and I am getting the same job done for… Read more »
Responding to John Medved’s question: in theory, since construction projects are bid competitive, they should reflect the current market value of labor, and since most contractors are hungry for work, they’ll bid accordingly to make sure they get that work.