While federal government proposals calling for $1 trillion in infrastructure spending would be credit positive for state and local economies, several constraints suggest that investment will be slow to ramp up, according to Moody’s Investors Service in a new report. Due to a lack of bipartisan agreement over funding mechanisms, as well as regulatory hurdles and practical constraints, Moody’s expects additional spending to be modest in 2017 and 2018.
Budget pressure at all levels of U.S. government in recent years has limited the ability to adequately reinvest in the nation’s critical infrastructure. Both parties in Washington have called for initiatives to address the funding gap, but disagreements over private sector involvement may prevent progress toward a consensus.
“Either proposal would amount to a $100 billion annual increase in spending on infrastructure,” says AJ Sabatelle, a Moody’s Managing Director and the lead author of the report. “But finding a reasonable balance between direct government spending and private investment will take time.”
In addition to political disagreement, regulatory approval issues like environmental reviews and litigation can slow the rate at which new infrastructure projects can materialize, according to the report, “US Infrastructure: Large Increase in US Infrastructure Spending Will Be Slow to Develop.” Meaningful acceleration of lead times for new projects would likely require regulatory reform involving federal, state and local agencies or passage of new legislation.
Practical considerations regarding the pace at which new projects can proceed are also likely to hamper near-term investment.
“Such a rapid increase would pose significant challenges to large engineering and construction firms, which would need to hire and train new project managers and locate skilled laborers,” says Sabatelle. “The sector is going to need time to gear up.”
If private capital is to play a significant role in facilitating the increase in infrastructure spending, the use of public-private partnerships (P3s) will likely be necessary. While the pipeline has grown, P3s currently fund less than 5% of annual infrastructure investment. Moody’s anticipates continued evolution of public policy and additional legislative action that promotes P3s and simplifies their legal framework.
Related Stories
Giants 400 | Oct 23, 2023
Top 75 Multifamily Engineering Firms for 2023
Kimley-Horn, WSP, Tetra Tech, Olsson, and Langan head the ranking of the nation's largest multifamily housing sector engineering and engineering/architecture (EA) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Giants 400 | Oct 23, 2023
Top 190 Multifamily Architecture Firms for 2023
Humphreys and Partners, Gensler, Solomon Cordwell Buenz, Niles Bolton Associates, and AO top the ranking of the nation's largest multifamily housing sector architecture and architecture/engineering (AE) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Senior Living Design | Oct 19, 2023
Senior living construction poised for steady recovery
Senior housing demand, as measured by the change in occupied units, continued to outpace new supply in the third quarter, according to NIC MAP Vision. It was the ninth consecutive quarter of growth with a net absorption gain. On the supply side, construction starts continued to be limited compared with pre-pandemic levels.
Warehouses | Oct 19, 2023
JLL report outlines 'tremendous potential' for multi-story warehouses
A new category of buildings, multi-story warehouses, is beginning to take hold in the U.S. and their potential is strong. A handful of such facilities, also called “urban logistics buildings” have been built over the past five years, notes a new report by JLL.
Contractors | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Office Buildings | Oct 19, 2023
Proportion of workforce based at home drops to lowest level since pandemic began
The proportion of the U.S. workforce working remotely has dropped considerably since the start of the Covid 19 pandemic, but office vacancy rates continue to rise. Fewer than 26% of households have someone who worked remotely at least one day a week, down sharply from 39% in early 2021, according to the latest Census Bureau Household Pulse Surveys.
Contractors | Oct 19, 2023
Poor productivity cost U.S contractors as much as $40 billion last year
U.S. contractors lost between $30 billion and $40 billion in 2022 due to poor labor productivity, according to a new report from FMI Corp. The survey focused on self-performing contractors, those typically engaged as a trade partner to a general contractor.
Urban Planning | Oct 12, 2023
Top 10 'future-ready' cities
With rising climate dilemmas, breakthroughs in technology, and aging infrastructure, the needs of our cities cannot be solved with a single silver bullet. This Point2 report compared the country's top cities over a variety of metrics.
Higher Education | Oct 10, 2023
Tracking the carbon footprint of higher education campuses in the era of online learning
With more effective use of their facilities, streamlining of administration, and thoughtful adoption of high-quality online learning, colleges and universities can raise enrollment by at least 30%, reducing their carbon footprint per student by 11% and lowering their cost per student by 15% with the same level of instruction and better student support.
Architects | Oct 4, 2023
Architects and contractors underestimate cyberattack risk
Design and construction industry firms underestimate their vulnerability to cyberattacks, according to a new report, Data Resilience in Design and Construction: How Digital Discipline Builds Stronger Firms by Dodge Construction Network and content security and management company Egnyte.
