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Sky-high prices for fuel, concrete, steel slow road projects

All over the state rising energy costs are playing havoc with road construction. The construction and maintenance budgets of cities, counties and the state are struggling to keep up.

In Jackson County the road manager anticipates a $45,000 to $50,000 shortfall in his fuel budget. In May the county’s road department requested an additional $126,900 to put into the fuel fund and has another as yet undetermined request pending for August.

“No one saw it going up so much,” said county spokesman Ken Flanagan. “We do a lot of our own paving, but we’ve got to seriously look at our work and how much we will be able to do. We laid down 27 miles last year but we don’t know about this year.”

The county is also working to find a solution for a contractor who’s trying to back out of a contract to re-pave a street in Pascagoula. With no fuel escalation cost built into the contract, the price of the work rose sharply after the contract was signed.

“We’re still looking into the contract,” Flanagan said. “It’s not our purpose to take advantage of the contractor. Our purchasing department is trying to help him find the best deals on asphalt, fuel and other things so this project can move forward.”

Key Constructors president David Trevathan is feeling the pain, too. “It’s killing us,” he said of rising energy costs. “It’s normally about two months from the time we get a bid until we start work. The projects with the state have a fuel escalation clause that helps, but a lot is consumed that isn’t covered. We use a lot of diesel.”

He said the costs of concrete and steel affect the Madison-based company more than fuel costs. “So much steel is shipped to China. They don’t have any scrap steel and buy up all they can get from us,” he said. “Then they make something with it and sell it back to us.”

Trevathan, who’s been with Key Constructors 29 years, recalls the energy problems of the late 1970s and early ‘80s when it was also difficult to estimate and projects costs of construction. The difference then and now is that the purchasing power of China was not a factor.

Key’s employee base is down about 25%. The company is still bidding on work for the Mississippi Department of Transportation (MDOT) although state projects are falling off rapidly.

“We prefer to do work for MDOT and really don’t have a choice but to keep bidding,” he said. “With cities and private work, the costs are just as bad.”

Things are bad for members of the Mississippi Road Builders Association, says executive director David Barton. “Our members are in dire straits. A lot are running out of work,” he said, “and I don’t see an end because a lot of money for projects is going to fuel escalation costs.”

Although the built in fuel escalation costs are pass-through money, it helps road builders and is an expense not usually factored into city and county contracts.

MDOT Commissioner Wayne Brown points out that the agency’s budget was $900 million 10 years ago when he was first elected. Today, the budget remains about the same. With cars driving less, funds derived from the fuel tax are going down.

To further illustrate his point, Brown says one ton of hot mix asphalt was $35 ten years ago; today it costs $75 and is headed to $100 along with dramatically increasing costs for concrete and steel.

“Basically, roads, like many things, come out of oil wells; it requires a great deal of energy,” he said. “Where we would build 40 major projects in the past, now we will build only 26.”

Butch Brown, MDOT’s executive director, notes that $100 million buys only $60 million toward delivering the agency’s product.

“Our program is greatly affected by people buying less gas,” he said. “We may become like a lot of other states who only do maintenance and have no new construction. We’re not there yet but every day we creep closer and closer. We’re in a downward spiral of revenue and an upward spiral of costs. Something has to change.”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.

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