Rising costs could limit West Virginia's $2.8B Roads to Prosperity program
- West Virginia Transportation Secretary Tom Smith told those gathered for a news conference last week that the $2.8 billion state Roads to Prosperity initiative could be limited by an 8.8% increase in construction costs, according to the Charleston Gazette-Mail.
- Bids for the first project of the program, which came in approximately $100 million higher than state estimates, highlighted the new cost reality, although officials expected some upward movement in prices due to design changes. West Virginia House Minority Leader, Democrat Tim Miley, has suggested that inflation may limit the number of Roads to Prosperity projects and brought up the possibility that the Gov. Jim Justice administration intentionally low-balled project costs to make it appear as though the program could deliver more projects. Smith would not say whether any projects would be canceled but did say that the state would "adapt the budget and act accordingly" if costs continue to increase.
- Smith said President Donald Trump's tariffs on steel had contributed to higher costs but that prices for materials like asphalt had already been on the rise before the new duties went into effect. Smith also noted that the state had netted additional money from lower-than-expected interest rates on $1.2 billion of road bonds.
The Trump administration, which has a $1.5 trillion infrastructure program pending, has come under fire for imposing a 25% tariff on steel and a 10% tariff on aluminum imports, a move that makes many construction projects more expensive.
An Associated General Contractors of America analysis of Labor Department data last month found that construction costs have risen sharply during the past few months. Year over year, prices for metal-based products like aluminum mill shapes (+20%), copper and brass mill shapes (+17.4%) and steel mill products (+12.3%) have seen double-digit increases. The most recent rise in the price index for new construction was only 4.3%, well below the overall producer price index increase of 9.6% during the last year. This gap means contractors will realize lower profit margins and not have as much money to invest in their businesses.
Rising material prices plus higher costs of labor are behind the $460 million increase to the price tag for a 7.8-mile light-rail extension in Seattle. Economist Ken Simonson from the AGC said contractors are typically required to submit guaranteed prices for such projects and are likely inflating those numbers to cover any further cost hikes.
- Charleston Gazette-Mail DOT secretary: High construction costs raise issues for Roads to Prosperity
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