Energy Boom Helps Lift Construction Outlays
Real GDP grew at a 4.6 percent annual pace in the second quarter, with structure investment making a modest contribution to the headline. Petroleum and natural gas exploration, which makes up the largest share of structure outlays, improved markedly during the quarter. In particular, drilling activity, as reported by the American Petroleum Institute, continued to firm in the second quarter. Energy producers, however, have dialed back production over the past two years due to the glut in natural gas supply that has driven prices to a low level
According to the U.S. Energy Information Administration, natural gas marketed production is expected to grow by an annual rate of 5.3 percent in 2014, but moderate to a 2.1 percent in 2015.1 This trend can also be seen in the overall slower pace in rig count. That said, the key underlying components driving headline structure outlays could simply shift from drilling to chemical manufacturing plant investment as domestic and foreign companies venture into natural gas reserves.
Other structure components that showed improvement were office, warehouse and institutional (religious, amusement parks, education and transportation), while power and communication outlays fell during the quarter. The improvement in structure investment is also consistent with the value of construction put-in-place and leading indicators including the Dodge Momentum Index (DMI), construction starts and architecture billings.
Structure investment should continue to strengthen in the coming quarters, especially with third quarter construction spending already off to a good start. The value of private nonresidential construction spending increased 2.1 percent in July with power, manufacturing, lodging and healthcare leading the way. With power outlays expected to return to its normal trend in the second half of the year, private nonresidential construction spending should rise 9.7 percent in 2014, and increase around 7 percent in 2015.
This report is available on wellsfargo.com/economics and on Bloomberg WFRE.
New York State’s Local Roads And Bridges Have Significant Deterioration; Conditions Will Worsen Under Current Funding Levels, Which Would Need To Nearly Triple Over Next Decade To Make Needed Road And Bridge Repairs
Nearly half of New York’s locally maintained roads are in need of rehabilitation, preservation or reconstruction and almost one-third of locally maintained bridges are deficient and in need of corrective maintenance or rehabilitation. However, local governments face a significant shortfall in funding needed to maintain and repair the roads, according to a new report released today by TRIP, a Washington, DC based national transportation organization.
The TRIP report, “The Condition and Funding Needs of New York’s Local Roads and Bridges,” finds that a total of 47 percent of the state’s locally maintained roads are in need of rehabilitation or reconstruction. Fifteen percent of New York’s local roads are rated in poor condition. Roads rated poor are in the later years or beyond their service life, show significant signs of deterioration, and need to be replaced or reconstructed. In some cases, poor roads can be resurfaced but often are too deteriorated and must be reconstructed. An additional thirty-two percent of New York’s locally maintained roads in need of rehabilitation or preservation to correct adverse effects of age and wear. A desirable goal for state and local organizations that are responsible for road maintenance is to keep 75 percent of major roads in good condition. Thirty-four percent of New York’s locally maintained roads are in good condition and 19 percent are in excellent condition. Roads in good condition require maintenance and minor repairs to protect pavements from avoidable deterioration, while roads in excellent condition require only drain cleaning and crack sealing.
In addition to deteriorated road conditions, a total of 31 percent of New York’s locally maintained bridges are in need of corrective maintenance or rehabilitation to restore the bridge to good condition. Seven percent of locally maintained bridges have serious deterioration that require significant repairs while an additional 24 percent of locally-maintained bridges are rated as deficient and will require corrective maintenance or rehabilitation to restore the bridge to fully functional, non-deficient condition. Of the remaining bridges, 31 percent are in good condition and 38 percent are in excellent condition. Bridges in good condition require regular maintenance and minor upgrades or repairs, while bridges rated excellent need only regular cleaning and sealing.
The TRIP report is based on surveys that were completed by local governments in New York. Forty-two of New York State’s 62 counties and 29 of its municipalities completed the TRIP local roads and bridges survey.
“Having a modern system of roads and bridges in New York State must be a priority,” said Timothy Hens, president of the New York State County Highway Superintendents Association and the Highway Superintendent of Genesee County. “The TRIP report is yet another confirmation that investment in the state’s transportation infrastructure has for years been far short of what is needed. Consequently, we continue to fall further and further behind in our efforts to maintain the system, especially our local roads and bridges. It is therefore critical that the next state Five Year Transportation Capital Plan boosts investment in our transportation infrastructure to ensure its continued safety and functionality and to secure New York’s competitiveness for economic development and job creation for all communities throughout the state.”
Agencies responsible for maintaining New York’s local transportation systems estimate a significant shortfall in needed funds to maintain and repair roads, bridges and highways. The current amount of annual spending on New York’s local roads and bridges would need to increase by 64 percent in order to keep locally maintained roads and bridges in their current condition over the next decade. In order to improve the condition of all locally maintained roads, highways and bridges to good condition or better, the current amount of annual spending over the next decade would need to nearly triple.
The efficiency of New York’s transportation system, particularly its highways, is critical to the health of the state’s economy. A 2007 analysis by the Federal Highway Administration found that every $1 billion invested in highway construction would support approximately 27,800 jobs. The Federal Highway Administration estimates that each dollar spent on road, highway and bridge improvements results in an average benefit of $5.20 in the form of reduced vehicle maintenance costs, reduced delays, reduced fuel consumption, improved safety, reduced road and bridge maintenance costs and reduced emissions as a result of improved traffic flow.
“New York’s locally maintained roads will require significant rehabilitation and modernization in order to provide a high quality of life for the state’s residents and an attractive economic climate for businesses and industries,” said Will Wilkins, TRIP’s executive director. “The state’s counties and municipalities must have the funding to make the maintenance, repair and upkeep of their transportation system a top priority.”
New York’s extensive system of roads, highways and bridges provides the state’s residents, visitors and businesses with a high level of mobility. New York’s locally maintained roads provide for travel to work and school, visits with family and friends, and trips to tourist and recreation attractions while simultaneously providing businesses with reliable access for customers, suppliers and employees.
A variety of agencies are responsible for the maintenance and repair of New York’s system of roads and bridges. In addition to transportation assets maintained by federal or state agencies, New York’s local governments are responsible for the repair, maintenance and upkeep of nearly 9,000 bridges (more than half of the bridges in the state) and over 100,000 miles of roads (approximately six out of every seven miles of roads in the state). With already strapped budgets, counties and municipalities must allocate increasingly scarce resources to the maintenance, repair and upkeep of their transportation systems. As a result, a significant portion of New York’s locally maintained roads and bridges is in need of repair or replacement and the current amount of annual transportation funding for local roads is just one-third of what counties and municipalities estimate is needed to make needed repairs to their roads and bridges over the next decade.
New York will need to improve the physical condition of its transportation network and enhance the system’s ability to provide efficient and reliable mobility for residents, visitors and businesses. Making needed improvements to local roads, highways and bridges could provide a significant boost to the state’s economy by creating jobs and stimulating long-term economic growth as a result of enhanced mobility and access. Meeting New York’s need to modernize and maintain its system of local roads, highways and bridges will require a significant, long-term boost in transportation funding at the federal, state and local levels.
To prepare this report, TRIP compiled survey responses from town, city, municipal and county governments in New York that completed a TRIP survey on road and bridge conditions, current transportation spending and the annual funding needs of each county or municipality over the next decade. Information on the condition of roads and bridges and needed funding levels for each local government that responded to the TRIP survey can be found in the appendix of the report.
Agencies responsible for maintaining New York’s local roads and bridges estimate a significant shortfall in needed funds to maintain and repair roads, bridges and highways. At current levels of funding, the condition of locally maintained roads and bridges in New York will worsen and repair costs will escalate. Addressing road and bridge deficiencies before they further worsen will save money because it will be much more costly to make repairs if conditions worsen.
Population increases and economic growth in New York have resulted in increased demands on all of the state’s roads and bridges, leading to increased wear and tear on the transportation system.
Nearly half – 47 percent –of New York’s locally maintained roads are in need of rehabilitation, preservation or reconstruction.
Nearly a third – 31 percent — of locally maintained New York bridges are deficient and in need of corrective maintenance or rehabilitation to restore the bridge to good condition.
|Correct: >4 but <5||24%|
|Good: >5 but <6||31%|
The efficiency of New York’s transportation system, particularly its highways, is critical to the health of the state’s economy. Businesses are increasingly reliant on an efficient and dependable transportation system to move products and services. A key component in business efficiency and success is the level and ease of access to customers, markets, materials and workers.
For the completer report visit: tripnet.org
Sources of information for this report include responses to a TRIP survey from individual New York municipalities and counties, the Federal Highway Administration (FHWA), the U.S. Census, and The Bureau of Transportation Statistics (BTS). All data used in the report is the latest available