DOT warns of project cuts amid inflation concerns
By Catherine Godbey
We all feel the sting of inflation — yes, even the government.
When the Metropolitan Planning Organization met last week to approve the projects included in the draft Transportation Improvement Plan, it received a warning from Johnny Harris, division engineer with the Alabama Department of Transportation.
“Don’t be surprised if some of these projects are moved out,” Harris said. “If they aren’t practical, they will be cut from the final.”
What would cause DOT to eliminate projects? Money.
In August, DOT will add a 4 percent increase, compounded annually, to the proposed projects in the Statewide Transportation Improvement Plan. Funding is derived from federal and state gasoline taxes. DOT is adding the increase to ensure that the projects planned for in the next five years have proper funding.
Inflation and project overruns are two factors that escalate the expenses of projects. Construction costs increase every year due to price inflation, said Ben Armstrong, geographic systems planner of North-central Alabama Regional Council of Governments. The increase stems from the price of materials used in road construction and bridge repairs, such as crude oil, diesel fuel, asphalt and steel.
According to Ken Simonson, chief economist of the Associated General Contractors of America, the cost of highway and street construction increased 5.5 percent from May 2006 to May 2007. The price of steel, used for bridge guardrails, decreased by 3.8 percent in 2005 after an increase of 49 percent in 2004.
“The cost of construction materials have extreme volatility,” Simonson said. “Mostly in the upward direction.”
DOT officials hope that by adding 4 percent, they will combat the fluctuating price of construction materials. In addition to the inflation rate, project overruns can augment the expense of a project. If a project lasts longer than expected or unforeseen costs arise, a project will run over the budgeted amount, Harris said.
NARCOG and Decatur officials support the 4 percent increase.
“If the state doesn’t increase the cost of projects, by the time they (the projects) get to construction, they will have overrun the planned cost,” said Dewayne Hellums, director of transportation for NARCOG.
“With the increase we can now be more realistic about the projects we have in the system,” Mayor Don Kyle said.
Hellums followed DOT and added 4 percent to the local projects NARCOG helps fund. When calculating the budget with the 4 percent increase, the remaining balance for 2012 plummeted from $1.97 million to under $600,000.
Once the 4 percent is added, DOT will rebalance the plan and determine which projects to fund and which ones to reprogram. DOT prioritizes the projects from each division and will finance the ones considered most important, Harris said.
Decatur is expected to feel the effect of the increase. At least one project in the draft plan Harris doesn’t believe will make the final is a de-icing system for the Interstate 65 Tennessee River bridge.
The Metropolitan Planning Organization will learn which projects DOT approved when it meets in August to approve the final plan.
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