Pennsylvania’s year of ups and downs continues

Vlahos

If Pennsylvania’s aggregate producers weren’t already shaking their heads about 2020, they most certainly must be now.

Around Thanksgiving, the Pennsylvania Department of Transportation (PennDOT) gave notice that hundreds of construction projects around the state were on track to be shut down once the calendar turned to December. At the time, PennDOT estimated it had lost about $500 million this year because of the pandemic.

The timing of PennDOT’s request for bonding authority to solve a cash flow crunch was interesting in that it came after Election Day and yet roughly a week and a half before the next seven months of the state’s budget needed final approval. Ultimately, a short-term compromise was reached between the governor and legislators to address PennDOT’s cash flow issue and ensure projects continue into February 2021.

The political compromise provides assurance to Pennsylvania’s aggregate producers about most of the winter ahead. But the industry in the Keystone State recognizes that fundamental change is necessary to ensure transportation infrastructure projects are properly funded in the years to come.

“The reality is we have a short-term solution,” says Peter Vlahos, president of the Pennsylvania Aggregates & Concrete Association (PACA), whose organization represents the state’s crushed stone, sand and gravel producers. “Long term, we have the challenges of how do you effectively manage the network funding wise.”

Searching for solutions

On the bright side, PennDOT realizes the state must come up with better ways to fund transportation infrastructure projects.

Facing an $8.1 billion gap in its annual highway and bridge transportation funding, the department is requesting public feedback through Dec. 17 as a means to find a better way forward. For as PennDOT describes, 74 percent of its funding derives from gas taxes, and those have become increasingly unreliable.

“A safe and reliable transportation network is critical to quality of life for those who travel throughout our state,” says Yassmin Gramian, PennDOT secretary. “We take our responsibility as stewards of mobility very seriously, which is why we must explore our options.”

Through the PennDOT Pathways program, the department launched an initiative to examine possible near- and long-term funding solutions – and how they could potentially work within Pennsylvania. As part of the program, PennDOT launched an alternative funding Planning & Environmental Linkages (PEL) study to explore options for funding the maintenance and improvement of Pennsylvania’s highways and bridges.

Yet, according to Vlahos, a step in solving Pennsylvania’s funding problem might be in public-private partnership (P3). In light of PennDOT’s experience with the Rapid Bridge Replacement P3 project, Pennsylvania’s Public Private Transportation Partnership board approved a new transportation initiative at the end of November to accelerate the reconstruction and rehabilitation of major bridges in partnership with the private sector.

Now, through the Major Bridge P3 program, PennDOT says it will be able to accelerate critical work on major bridges across the state through the consideration of user fees.

“The department is trying to come up with innovative funding solutions to fix the short-term and long-term funding challenges of a sole gas tax revenue,” Vlahos says. “The P3 is the first piece of that puzzle, and apparently additional pieces are coming.”

In the end, Vlahos suspects that whatever solutions emerge will come down to how much the public wants to pitch in for safe and reliable roads and bridges. He’s seen a number of short-term and long-term fixes emerge in his time to keep projects going, so it is encouraging for him to see the conversation shift toward the bigger picture.

“With the challenge we saw on the bonding authority, that is a symptom and not a disease,” Vlahos says. “The symptom was cash flow, and they were trying to deal with that. In the bigger picture, the disease is how do you fund a robust network of roads and bridges in the commonwealth of Pennsylvania outside of the gas tax?”

Pennsylvania’s year that was

Pennsylvania is one of the nation’s leading crushed stone-producing states. Photo: P&Q Staff

That threat of a late-year shutdown of construction projects was the latest in a string of 2020 events that probably gave construction stakeholders like Pennsylvania’s aggregate producers heart palpitations.

Back in the spring, with lockdowns taking place across the nation, Gov. Tom Wolf (D-Pennsylvania) took the unusual step of characterizing cement and concrete businesses as “life-sustaining” while bestowing a “non-life-sustaining” label onto the aggregate industry.

“If you understand anything about the industry, you need aggregate to do anything,” Vlahos says.

He admits PACA was fortunate to have that characterization of aggregate-producing businesses changed within 24 hours.

“Version 1.1 effectively made the aggregates industry ‘life-sustaining’ so we can continue to provide material to produce cement clinker and ready-mix concrete,” Vlahos says.

Even more troubling for Pennsylvania’s construction materials industry was that the governor shut down construction.

“I believe we were one of three states,” Vlahos says. “It covered residential, commercial and public works. Turnpike projects ceased to exist. So even though the aggregate, ready-mix and cement industry were ‘life-sustaining,’ there was no market.”

Fast forward

Says PACA’s Peter Vlahos: “The annual PennDOT program was revised from about $2.2 billion to about $1.9 billion for 2020. When I talk to my peers across the U.S., I have to be pragmatic: that is a sizable program for a state.” Photo: P&Q Staff

The construction materials industry largely overcame the construction shutdown in late spring, according to Vlahos. The ramifications of a more forceful lockdown are still being felt, though. A case in point: that PennDOT shortfall of about a half-billion dollars.

“PennDOT, because of COVID-19, said they’re going to be $800 million in the hole from March 1 to June 30 of 2021,” Vlahos says. “But that number has declined, maybe down to $500 million, in terms of the impacts right now. Going into the summer, we saw traffic came back.”

While $500 million remains a sizable hole, Vlahos argues that the size of the PennDOT lettings program remains one of the bigger programs across the U.S. It’s something the state’s aggregate producers can hang their hats on.

“The annual PennDOT program was revised from about $2.2 billion to about $1.9 billion for 2020,” Vlahos says. “When I talk to my peers across the U.S., I have to be pragmatic: that is a sizable program for a state.

“Hopefully, Congress will approve the AASHTO-requested (American Association of State and Highway Transportation Officials) backfill of $37 billion to help all DOTs recover the revenue loss due to the pandemic before it is too late for the national contractor and construction materials industries,” he adds.