SCDigest’s On-Target E-Magazine

Oct. 15, 2013

Are US Infrastructure Woes Finally Starting to Show? Running Circuitous Routes in Pennsylvania

We have been part of the on-going debate about just how bad – or not – US logistics infrastructure really is.

One the one hand, the American Society of Civil Engineers (ASCE) keeps rolling out “report cards” saying that US logistics and other infrastructure is in horrible shape.
In its 2013 report last Spring, the US overall received a grade of D+, and the ASCE says $3.6 trillion beyond what we spend now will be needed to close the gaps over the next decade. That level of funding, of course, is a pipe dream.

The overall near failing grade from the ASCE includes some categories that aren’t logistics related, such as drinking water and parks and recreation, but in general the results are similar across categories, with the exception of solid waste handling infrastructure, which received a B+.

For the logistics related areas, grades were as follows: Roads: D, Rail lines: C+, Ports: C, Inland Waterways: D, Bridges: C+.

That last grade was a bit surprising, as we’ve been hearing about the poor conditions of US bridges for years, accentuated by collapse of the I-35W Mississippi River bridge in St. Paul in 2007 that killed 13 people and injured 145.

That caused a lot of angst about perhaps other dangerous bridges out there, but the concern quickly dissipated. With the recession the next year and relatively modest budgets for transportation in the finally approved highway bill in 2012, little progress has been made in upgrading US roads and bridges, across which trucks still carry about 68% of total US freight tonnage, according to analysis from the American Trucking Associations. (See Interesting Predictions on How US Freight Market Will Play Out over Next 12 Years.)

The ATA actually expects trucking’s share of freight movement to increase in coming years.

On Sept. 25, a section of the Leo Frigo Memorial Bridge near Green Bay buckled, and the bridge still remains closed to traffic.

On the other hand, in the bi-annual Logistics Performance Index rankings from the World Bank, US logistics infrastructure actually ranked fourth out of some 150 countries rated in the study.

That doesn’t sound like the report from the ASCE, does it? And SCDigest will note that supply chain and logistics executives to date have rarely if ever cited infrastructure concerns as anywhere near the top of their list of challenges.

So who is right? Is it possible both perspectives are accurate?

The answer to that last question might just be Yes, as thousands of miles of roads and thousands of US bridges might be getting by in the short term, but are on the cusp of major issues that could severely impact shippers and carriers not too far down the road.

Major issues would include the following: (1) Even if funding becomes available to upgrade or replace existing bridges, the process will usually take many years; (2) Aging US bridge capacities could be downgraded so that heavy truck crossings are prohibited or limited.

Even in the better scenario 1, that still could mean detours that might add significant time and cost to usual routings until the work is finally complete, usually years later.

Take a small example from tile maker Armstrong Industries. A company executive told the Wall Street Journal this week that the trucks coming into or out of its factory in Marietta, PA will soon have to take a 25-mile detour to avoid a bridge on the way that is no longer going to be rated to carry fully-loaded truck weights. That change will actually add as much as $300,000 to Armstrong’s annual freight spend.

The ASCE report says that one out nine of the 600,000+ bridges in the US is deficient. Could a wave of lower ratings on these bridges cause major headaches and costs to shippers and carriers, as infrastructure woes finally start to have a real impact?

“Having a transportation system that becomes less efficient hurts our ability to compete,” David Ellis, of the Texas A&M’s Transportation Institute, told the Wall Street Journal.

But as always, the question is money. The federal fuel tax has been flat for 20 years, and cars and trucks are getting better mileage. Many groups, including the American Trucking Associations, are calling for a hike in such taxes to support road and bridge improvements.

There were some talks this summer in the House Transportation and Infrastructure Committee on the possibility of increasing the 18.4 cents per gallon federal gas tax (it’s 24.4 cents for diesel). That was related to a $20 billion shortfall between what the tax is bringing in and the level of commitment for infrastructure spending. But no action was taken to really move a potential increase forward.

The ASCE says hundreds of billions of dollars more is needed, which might require huge increases in federal and state fuel taxes, a change that seems unlikely.

An emerging issue is that most roads and bridges are actually “owned” and managed at the state level, where funding is even more questionable. As just one example, one in four Pennsylvania bridges is estimated to be deficient – the highest ratio in the nation. The state recently reduced the weight limits on an amazing 1000 bridges, including the one impacting the Armstrong plant.

This has manufacturers and others worried that trucks will soon have to take costly, circuitous routes to get from point A to B.

Small trucking firm owner Bob Wilson tells the Wall Street Journal that he estimates the new ratings will add 10% to the cost of a haul from Pittsburgh to Boston.

And that may lead to a whole new competitive factor, as some manufacturers and distributors in each market could be impacted differently by bridge troubles and growing traffic congestion, putting some firms behind an economic eight-ball versus others.

Most states are in the same boat. Iowa is set to soon release a report that will recommend alternatives to raising the state’s gasoline tax to generate additional money to fix the state’s road system. The Iowa DOT estimates it faces a $215 million annual shortfall in needed funds.

How bad is US logistics infrastructure, really? Do you see bridge deficiencies as a growing problem? And the federal taxes on gas and diesel should be raised to…. Let us know your thoughts at Feedback button or section below.