The $1.3 trillion omnibus appropriations bill for Fiscal Year 2018 (FY18) will significantly boost Federal highway dollars this construction season, positively impacting the asphalt pavement markets.
While the mammoth two-year (2018-2019) budget deal agreed to on February 8, 2018 allocated $20B to infrastructure, roads and highways will not be the only bearer of that money.
Under the bill, infrastructure is defined as “programs related to rural water and wastewater, drinking water, rural broadband, energy, innovative capital projects, and surface transportation.”
That means the agreement to allot $10B per year for two years on “infrastructure” doesn’t necessarily mean the areas we work on will be getting all that money.
The Omnibus Appropriations Committee went to work to determine how much of the $20B allotted for “infrastructure” will be allocated to highways.
The core Federal-Aid Highway program received $43.3B in 2017. The FAST Act assumed a $900M increase in federal-aid highway funding in 2018 and Congress honored that increase, bringing the total federal highway fiscal year spend for 2018 to $44.23B.
Starting this year, the appropriations committee also enacted a general bonus fund giving $2.53B to highway programs. That means there is an additional $3.46B total to spend on our roads in 2018.
$1.98B of the general fund money will directly impact the asphalt industry through the Surface Transportation Block Grant program, a core FHWA program. The other funds will go to disaster relief and other programs not impacting asphalt.
Under the Surface Transportation Block Grant program program, states will be seeing $1.98B from the general fund directly allocated to their State DOT and local Mayors. Roughly 53% of that money is then sub-allocated to metro areas but the appropriations committee says that the money must be spent on construction of highways, bridges and tunnels.
“What we’ve learned is that when the states get the money, they tend to spend it on highways,” Jay Hansen, executive vice president at NAPA says. “If the Mayor gets the money, they will divert more of it into transit and livability programs. How the money will be spent is really up to the industry and the state asphalt pavement associations and their colleagues to make sure that when money goes to the cities, the money is spent on its intended purpose.”
Since there is also a match with this program, states that have not increased their user fees will struggle and states that are matching federal dollars will see an even larger increase in their construction market.
“This should be seen as a reason for states to increase their highway revenues,” Hansen says. “States that don’t have the match are leaving good money on the table. That’s a talking point with your legislators.”
Other Funding Out There
The Omnibus Appropriations Bill also extended to the Airport Improvement Program that funds runway, taxiway and apron projects. This year, Congress added a $1B bonus from the general fund for discretionary grants.
“This is a really important program for our industry,” Hansen says. “That means a lot of airports, including the general aviation airports, will see grants. And since over 92% of the general aviation airport runways and taxiways are asphalt, this is very good for the asphalt pavement market and this construction season.”
Transportation Investment Generating Economic Recovery (TIGER) Grants are also an option. These grants are over and above money allocated to the states by the US DOT to fund road, transit, maritime and rail projects.
There are 59 grants under the program, meaning every state should theoretically receive a grant which has a $25M maximum grant size.
The bottom line is that 2018 is expected to be even better than 2017 as total federal infrastructure spending is up $7B in the asphalt pavement market, that’s a 15% increase. What we all need to make sure of is that the money is being used for its intended purpose. Don’t be afraid to reach out to your legislators and let them know. Find them here: https://openstates.org/find_your_legislator/
Here’s hoping the predictions come true and 2018 is your best year yet. Make sure you keep us posted on the projects you’re working on. E-mail me at [email protected].
