The Overhead Wire Daily | May 2nd, 2024 | State Capacity

Back in August we shared a paper on state capacity that was written up in The American Prospect that basically said when transportation departments are looking to resurface roads, the places with more public sector capacity are likely to have more bids and lower construction costs. I thought at the time it’s something that likely can be extrapolated to capital projects for transit as well.

Fast forward to today and the Bureau of Transportation Statistics has estimated that highway construction costs could reduce the impact of the IIJA (2021 infrastructure bill) by 40% if inflation remains high. Crude oil which is used to produce asphalt (which we did a really interesting podcast episode on) is one of the largest pressures BTS cites, but I really do wonder how much is lost to this capacity issue which the National Highway Construction Cost Index obviously doesn’t include.

As with the current discussions around inflation calculations and their seeming inability to measure how long term housing supply constraints are impacting the overall numbers, it would be interesting to see how much of this astronomical inflation in transportation construction is a lack of state capacity, something not measured by the cost indexing mechanism.

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