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
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.
Building Materials | Oct 2, 2023
Purdue engineers develop intelligent architected materials
Purdue University civil engineers have developed innovative materials that can dissipate energy caused by various physical stresses without sustaining permanent damage.
Giants 400 | Sep 28, 2023
Top 100 University Building Construction Firms for 2023
Turner Construction, Whiting-Turner Contracting Co., STO Building Group, Suffolk Construction, and Skanska USA top BD+C's ranking of the nation's largest university sector contractors and construction management firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking includes revenue for all university/college-related buildings except student residence halls, sports/recreation facilities, laboratories, S+T-related buildings, parking facilities, and performing arts centers (revenue for those buildings are reported in their respective Giants 400 ranking).
Construction Costs | Sep 28, 2023
U.S. construction market moves toward building material price stabilization
The newly released Quarterly Construction Cost Insights Report for Q3 2023 from Gordian reveals material costs remain high compared to prior years, but there is a move towards price stabilization for building and construction materials after years of significant fluctuations. In this report, top industry experts from Gordian, as well as from Gilbane, McCarthy Building Companies, and DPR Construction weigh in on the overall trends seen for construction material costs, and offer innovative solutions to navigate this terrain.
Multifamily Housing | Sep 26, 2023
Midwest metros see greatest rent increase in September 2023
While the median monthly price of rent has increased by 0.71% in August, the year-over-year estimates show a national change of -0.06 percent.
Data Centers | Sep 21, 2023
North American data center construction rises 25% to record high in first half of 2023, driven by growth of artificial intelligence
CBRE’s latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70% already preleased.
