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Economy & competitive position/Public sector

Inflation takes bite out of road repairs

Michigan citizens know the pocketbook pressures of rising prices for such everyday items as bread, milk and even the occasional beer.

But less evident are the increased costs of the materials needed to build and repair the roads on which they drive. That means that the pennies of tax placed on each gallon of Michigan gas don’t go as far as they used to, which, in turn, affects how many roads Michigan can repair.

After Michigan raised its gas tax by 4 cents in 1997, it spent about $450 million in each of the next two fiscal years to repair 1,350 lane miles of roads annually. Lane miles are one mile of one lane of highway, per direction.

In fiscal 2012, the state spent $475 million, but fixed only about 1,275 lane miles. And that’s mainly a result of the reduction in purchasing power due to increased cost of construction, the Michigan Department of Transportation says.

For example, data from MDOT show that in the five years from 2005 to 2011, prices for asphalt have risen 46.8 percent, from $40.54 a ton to $59.53 per ton. Reinforced concrete that cost $47.20 per cubic yard in 2005, cost $79.99 in 2011, a nearly 70 percent increase.

Structural steel prices over the five-year span fluctuated. Steel that was $1.99 per pound in 2005 rose sharply to $3.84 the following year and then dropped, only to rise for three more years before dropping to 2011’s $1.79 per-pound price.

“The steady run-up on asphalt and concrete prices means we can fix fewer miles of roadway and bridges with our available funding, and fluctuations in steel prices make it impossible to predict some other costs,” said MDOT spokesman James Lake.

Most Michigan families know about inflation. A pound of bread that cost an average $1.04 in 2005 cost $1.44 in 2011, while a gallon of milk that was an average $3.18 in 2005 cost $3.57 in 2011. A 16-ounce malt beverage that cost an average $1.09 in 2005, rang up at an average $1.24 in 2011, according to U.S. Bureau of Labor Statistics Consumer Price Index average price data.

Still, in most recent years, prices of highway and bridge construction have annually outpaced inflation nationwide, according to data cited by the Michigan Infrastructure and Transportation Association. For example, in 2011, highway and bridge costs registered a 4.8 percent increase, compared with a 3.2 percent increase in the Consumer Price Index.

Add it all up and it simply means more money, fewer repairs.

Amy Lane is a former reporter for Crain's Detroit Business, where she covered utilities, state government and state business for many years.

1 comment from a Bridge reader.Add mine!

  1. Matt

    Guess I’m just a bit confused on the money here. My understanding is that MDOT receives around 3.3 billion dollars a year in funding. Where is the rest of the money?

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