Skyrocketing costs are snowballing for highway construction
projects
A crisis is looming as Santa Clara and San Benito Counties
populations continue to increase and roads continue to grow more
congested. It’s a national problem, and something has recently made
fixing the problem a little bit harder; the rising cost of road
construction materials.
Liquid asphalt, a petroleum product, is the black gooey stuff
that dries with rock mixed in to make the smooth roads we all take
for granted. Its price continues to increase even as petroleum
prices fall. It’s now at $300 a ton, when it was $200 last
year.
Skyrocketing costs are snowballing for highway construction projects
A crisis is looming as Santa Clara and San Benito Counties populations continue to increase and roads continue to grow more congested. It’s a national problem, and something has recently made fixing the problem a little bit harder; the rising cost of road construction materials.
Liquid asphalt, a petroleum product, is the black gooey stuff that dries with rock mixed in to make the smooth roads we all take for granted. Its price continues to increase even as petroleum prices fall. It’s now at $300 a ton, when it was $200 last year.
Michael Murdter, head of Santa Clara County Roads and Airports, named rising construction prices among the main reasons certain road improvement and construction projects weren’t rolling forward in Santa Clara County. The other main reasons were budget cuts by the county, and a lack of federal and state funds from gasoline taxes.
The cost of road construction in America is up 15 percent from last year, and on top of that labor costs are up 7.5 percent.
Has it been a problem in San Benito County?
“Yeah, to say the least,” said Peter Corn, assistant director of Public Works for San Benito County in charge of roads. Widening and building roads has become harder in San Benito County since the local quarry, Granite Rock, began raising the cost of materials, he said.
Arman Nazemi, another assistant director of Public Works in charge of engineering, said that many projects will have to be cut soon if costs continue to go up at the current rate. This year he is adding 20 percent to the cost of every project to account for increases. It’s no longer certain how much a project will cost until it’s done, so he is often forced to wait before he can budget for other projects. No contractor will go out and buy all the materials needed for a project and stock them up, so they are bought as they are needed, and the cost of materials rises quickly as the projects go on.
The Nash Road Bridge and the Union Road Bridge are among bridges and roads in San Benito County that will soon need to be rebuilt, which worried Nazemi. Some bridge and road projects may have to be cut if prices continue to rise at the current rate.
Sorely needed, federally-funded multi-million dollar projects could also lack the matching funds needed from the county, Nazemi said. Opportunities to acquire funds for federal match projects where the county supplies only 20 percent funding while the feds give 80 percent, might have to be passed up.
Bruce Woolpert, president of Granite Rock, said the company plans to increase rock prices another 75 cents per ton soon to cover rising production and delivery costs, The rising costs of natural gas, diesel fuel and steel used in mining gravel were to blame in what Woolpert described as a classic “ripple effect.”
“The increases are so dramatic,” Woolpert said. “We’ve had a 60 percent increase on diesel alone.” Diesel is used by the trains that haul the rocks from Woolpert’s Aromas quarry as well as for trucks and heavy equipment.
The loaders and bulldozers that take rock from the quarry are also becoming more costly to operate. Because the cost of steel has gone up dramatically, every replacement part needed for a dozer or loader now comes with a 5 to 8 percent markup after years of stable prices.
And those monstrous tires that are used on some loaders have become nearly impossible to buy. They now fetch $22,000 each when they used to cost $14,000 each. The two manufacturers of the tires, Michelin and Goodyear, are not producing the handmade tires fast enough. Michelin makes three a day. Many are being sent to China as that nation quickly builds infrastructure, Woolpert said.
Granite Rock had to lobby tire manufacturers to get a stock of the tires ahead of time, so now the quarry is its own tire dealer in a way. Woolpert said. The old Kaiser Cement quarry in Cupertino was not so careful, and a loader sat for weeks before a set of tires could be found for it.
Matt Jeanneret, spokesperson for the American Road Builders and Transit Association, said road construction prices continued to rise through the last month statistics were available, October. Asphalt and steel suppliers are simply reacting to the market where road construction materials are high in demand while the infrastructure destroyed by Hurricane Katrina is rebuilt and the Chinese government pursues a highway system on a level comparable to what exists in the U.S.
Its simple economics, Jeanneret said. The demand has increased, so quarries and suppliers charge more money to the taxpayer.
But Woolpert maintains that he not being an opportunist when he raises prices on materials. He says most of his customers are local and most quarriess in California are only affected by energy and steel costs, not by demands in the Southeast or China.
Right now some future business costs are unknown to him, such as how much natural gas will increase in the near future. The cost of natural gas is a big concern for Woolpert. In the 1990s natural gas cost $1 per million BTUs but is now at $12. Many hope it will come back down to around $6, but no one can be certain.
Pacific Gas and Electric has two utility increases in front of the state Public Utilities Commission that will affect all businesses that use energy, and one of them is for natural gas. The average PG&E bill is already skyrocketing from a lack of gas production in the southeast following hurricane Katrina, with the average gas bill rising from just over a $100 in January 2005 to over $150 for January 2006.The costs are important to a quarry that uses energy for crushing rocks and sorting them in machines that use massive amounts of electricity, some of which is produced by natural gas.
“Trying to plan your business right now is very difficult,” Woolpert said.
As costs for road building materials continue to rise, the federal gasoline tax that counties rely on for road construction has remained flat since 1993, causing the tax’s buying power to lower by 33 percent. The state of California had cut back its road construction budget over the last two years but brought the budget to “normal” levels this year, Woolpert said.
The realties of an aging road and transportation infrastructure will become more and more apparent as populations grow and roads need more maintenance and expansion, Jeanneret said. Throw in labor and materials costs that keep rising, and you have a crisis waiting to happen.
