Inflation Complicates Funding Estimates
Just when the waterways industry is celebrating recent funding successes in the Infrastructure Investment and Jobs Act and the recently passed Water Resources Development Act (WRDA), inflation is complicating the funding picture.
The U.S. Senate overwhelmingly voted to give final congressional approval to the 2022 WRDA as part of a must-pass annual defense bill, and it is certain to be signed by President Joe Biden. Among WRDA’s most important provisions is a measure making permanent the funding of major projects at a cost-share of 65 percent general federal revenues and 35 percent Inland Waterways Trust Fund, removing a sunset provision that would have had that cost-share expire in 10 years. This is a victory for the inland industry, which was nevertheless hoping for a 75-25 permanent cost-share. According to WCI president and CEO Tracy Zea, the change will allow the Corps to better plan future projects. Meanwhile, waterways advocates in Congress have promised to push for a change to 75-25 in the 2024 session.
Another win for the inland waterways industry within WRDA 2022 is the establishment of a five-year regional dredge pilot program. The pilot program aims to increase the reliability, availability and efficiency of federally owned and operated inland waterways projects, decrease operational risks across the inland waterways system and provide cost savings by combining work across multiple projects.
According to an analysis of recent U.S. Bureau of Labor Statistics data in July by Associated General Contractors of America, nonresidential construction input prices for materials and services increased 1.1 percent between May 2022 and June 2022 alone. In total, prices increased 16.8 percent between June 2021 and June 2022.
The respected construction economics blogger Ed Zarenski recently wrote, “No one predicted 2021 construction inflation. … Looking back, we now see nonresidential building inflation is 7 percent, the highest since 2006-2007 … in part driven by the highest rates of increase in materials on record.”
Inflation is rising so rapidly that, as the Inland Waterways Users Board recently reminded the Corps, the practice of updating cost estimates for major projects every five years is sadly outdated. IWUB members welcomed the Corps’ commitment to releasing those cost estimates annually. All this inflation in cost of materials means that what was considered “funding to completion” a year ago may not be so today.
