Beyond the Build

Commodities Pricing

Highways to Efficiency

Each quarter, I meet with a handful of real estate and construction executives to discuss what we’re seeing and the broader implications for the region. Our gathering this week included a visit with a DOT Director, John Cooper.

A state’s DOT decisions are often the lynchpins in a development, so the trends are definitely worth analyzing. Cooper shared the challenges and innovations he is seeing:

Stagnant gas tax in changing times. Gas taxes make up 40% of state highway revenue and 90% at the federal level, forming the largest source of road funding in the U.S. The problem? The tax was set at a flat 18.4 cents per gallon 20 years ago, and politics have kept that number from budging. At the time the law was made, this accounted for about 17.5 % of a tank of gas. Now, it’s less than 5 %. At the same time construction cost has gone up–some say 250% in the last three decades. Revenue increases have remained modest for several reasons including changing driving habits, densification of the population, alternative modes of transportation and just plain efficiencies.

The cars we drive. Our cars are getting more energy efficient, along with hybrid and electric vehicles hitting the roads and producing a cleaner environment. These cars have the same road system impact as internal combustion engines, yet provide little or no money for highway maintenance. Many states are now charging electric cars for their share of road costs. An annual fee would certainly help, but still probably do not fairly represent road use. States like Oregon, Washington and Nevada have launched “black box” pilot programs instead, charging users based on the mileage they log.

Fast Lane Passes. HOV lanes help. For faster travel lanes there is a “pay-as-you-go” plan. The catch? To comply with the federal laws, these express lanes have to be new construction–either a new lane added or a part of an entirely new roadway.

Bluetooth traffic monitoring. Bluetooth technology in our cars, phones and GPS systems is allowing measurement by DOTs through strategically placed readers that log average speed and travel distances of vehicles. This data allows DOTs to make value decisions for upgrades in road systems such as modified access management changes. Another initiative that is gaining traction is the closing down of entire sections of interstates during resurfacing or repair which results in more efficient construction cost and faster. This saves for the DOT, assuming there is a reasonable, viable detour.

If the revenue stream is not going to keep, then obviously initiatives are needed to stretch the dollar–always making it better and meeting the challenge.

Merrill Stewart Jr.

Merrill Stewart is Founder and CEO of The Stewart/Perry Company, a commercial building contractor based in Birmingham.