Transportation construction survives lean years

By Pat Goss

Imagine you received a 3 percent pay cut with very bleak prospects for any substantial raises in the future.

Now imagine that this was followed by a 27 percent increase in the cost of your basic goods like housing, utilities and food.

Change would be in order. You’d be looking to dramatically cut costs or find new ways to generate income, right?

Welcome to the predicament facing Wisconsin’s transportation construction industry, which was buffeted the past two years by lagging revenues and rising costs.

The state’s Transportation Fund, which finances not only highway construction but every other travel mode in Wisconsin, receives the vast majority of its money from vehicle registration fees and the gas tax. In December 2005, politicians agreed to repeal gas tax indexing, which for 20 years adjusted the tax rate to maintain the buying power of this key revenue source.

To make matters worse, motorists responded to surging gas prices over the past two years by purchasing more fuel-efficient vehicles, resulting in lower-than-anticipated consumption. Energy conservation is great, but it takes a toll when gas tax receipts represent two-thirds of state transportation revenues. This is why the Transportation Fund has run a deficit for more than a year.

On the cost side, global demand for construction material is having a ripple effect on Wisconsin. The emerging economies in China, India and Latin America require huge infrastructure investments, which demand the same steel, cement, asphalt and fuel that go into building Wisconsin’s roads, bridges, runways and port facilities.

The Wisconsin Construction Cost Index, reflecting the actual prices contractors must pay for these commodities, increased by 10 percent in 2005 and 17 percent last year.

These forces of lower revenues and higher costs are having a dramatic impact on the state’s transportation infrastructure investment program.

Hundreds of projects in both the public and private sectors have been delayed or scaled back because, in the current environment, available dollars are buying fewer projects. This translates into fewer work crews as well as fewer construction quantities that drive companies’ business models.

But, finally, there’s some good news.

As I write this column, the state Legislature is working on the 2007-09 state budget that will help determine the level of transportation investment over the next two years. Politicians on both sides of the aisle understand the challenges facing the industry and the important role these projects play in promoting safety and job growth.

They may disagree on ways to raise the needed revenue, but both parties have proposed workable solutions. I am guardedly optimistic that our elected state officials will reach a bipartisan consensus that begins to restore the transportation program’s buying power that has been lost over the past few years.

That would benefit Wisconsin in a number of ways.

Access to reliable transportation is one of the top factors businesses consider when they relocate or expand. In fact, 90 percent of the new manufacturing jobs created in Wisconsin during the 1990s were within five miles of a four-lane highway. Transportation must be an asset for state companies to compete in the increasingly global economy.

Second, jobs in transportation construction are some of the best in the industry, paying well and offering family supporting benefits. These are the kinds of jobs that provide the tax revenues needed for education, health care and other services that make Wisconsin a great place to live.

One recent study estimated that for every $1 invested in Wisconsin’s transportation system, the state would receive $3 in direct and indirect economic benefits. That’s reason enough to tackle the challenges facing our industry.