TCI Briefs House Transportation Committee on Costs

On August 19, TCI Members appeared before the House Transportation Committee to discuss increasing construction material costs. Robert Latham, executive vice president of the Associated Pennsylvania Constructors, provided the committee members with a chart from the American Road & Transportation Builders Association outlining the cost of highway and street construction materials. He pointed out the cost was up 18.9% in June 2008 compared to the same month last year while during the same period, inflation, as measured by the consumer price index, was 5%. Latham said over the last five years, the price of highway and street construction materials has risen 70%.

James Van Buren, representing New Enterprise Stone & Lime Company, provided an overview. According to Van Buren, the price of diesel fuel and asphalt has impacted PennDOT’s ability to let work and because of the increasing prices, less work is being done but at the same costs. Van Buren went on to explain that the department does not have as much money to spend and contracts are being pulled or reduced in scope. He said it appears that there will be little or no work for this fall or next spring. According to Van Buren, his company will have to lay off employees in the next four to six weeks.

Randy Good, representing Pennsy Supply, said he has been in business since the early 1970s and this has been "the most challenging year." He told the committee his employees have 22% less work hours this year compared to last year. Good also said he has had to close several asphalt plants and he now has 100 less employees. He emphasized that a major concern is losing good employees to other industries because of the instability in the industry. Good opined that the department and others have been caught in a "perfect storm" with revenue going down as costs have gone up considerably. He said there are a lot of highway projects that need to be done now before costs rise any further and there is a need to find a funding solution now.

Ronald Cominsky, executive director of the Pennsylvania Asphalt Pavement Association, provided data on the liquid cost impact on the hot-mix asphalt industry. He noted the cost per ton for liquid asphalt in August 2007 was $349 in eastern Pennsylvania and $323 in western Pennsylvania. Cominsky said the cost is now $834 in eastern Pennsylvania and $735 in western Pennsylvania. He told the committee members he has been in the hot-mix asphalt business for 39 years and this is "financially the worst situation ever." Cominsky explained that asphalt is made from "heavy crude" oil imported from Venezuela and Canada. He said problems in both countries have led to a tremendous shortage. He also said refiners now want to make a profit from refining the "heavy crude." According to Cominsky, the costs are leading to project deferrals and cancellations by the department which is drastically affecting the industry. He pointed out his members represent 138 plants of which 15% are temporarily or permanently closed. Cominsky also noted they have met with refiners who told them the prices are not coming down for "heavy crude."

08.21.08