Public Sector

Upgrading America’s Infrastructure

Climate change is speeding the deterioration of an already aged system. The fix will cost trillions.
By: | June 1, 2015

D+. That’s the grade assigned to the overall quality of America’s infrastructure by the American Society of Civil Engineers (ASCE). Just one notch above failure.

ASCE’s economic report on surface transportation, released in July 2011, reported that deteriorating infrastructure will cost the American economy more than 876,000 jobs and suppress the growth of GDP by $897 billion by the year 2020.

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Bad infrastructure has a cascading effect on the economy. Lack of capacity and poor road conditions lead to backups and bottlenecks.

That means products sitting in trucks aren’t reaching their destinations in a timely and efficient manner. Commuters are wasting time and fuel sitting in traffic. The cost in wasted fuel and lost productivity is staggering.

“The Federal Highway Administration calculates that highway bottlenecks cause more than 243 million hours of trucking delays each year, costing $7.8 billion.

When shipping takes longer, businesses have to reorient their supply chains and rely on more distribution centers, adding more costs,” said Mark Brockinton, managing director, transportation and logistics practice at Aon.

“In 2011, traffic congestion caused American commuters to purchase an extra $2.9 billion in fuel, costing more than $120 billion in added fuel costs and wasted time.”

The effects of climate change and increasingly severe weather only further constrain traffic flow and worsen road conditions.

“If you look at the severe winter we had in the Northeast, that created a lot of wear and tear on our roads and bridges,” said Andy Herrmann, past president of the ASCE.

“They had to put a lot of de-icing material down to combat that, but that salt mixes with water and accelerates the corrosion of steel and gets into the concrete and starts corroding the reinforcing bars. And when steel corrodes, it expands seven to eight times its volume. So when you look at a bridge deck or a roadway surface and you see a pothole, that’s those reinforcing bars expanding and pushing against the concrete.”

Steve Bojan, vice president of fleet risk services for HUB International, added, “When you talk about climate change and harsh weather, you look at the Northeast and it wreaks havoc. [This past winter] was horrible. All bets were off on everything. Roads, whole cities, interstates were shut down. So you end up backing everything up for days, and at some point, some goods and services are just not produced. It’s in the billions of dollars a day in activity that can’t be done.”

“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard.” — Erik Johanson, manager of strategic planning and analysis, SEPTA

Federal and state governments are taking steps to improve infrastructure, especially after Superstorm Sandy demonstrated that the effects of climate change can literally bring major cities to a standstill and incur huge costs.

In 2011, the Federal Transit Administration selected seven transit agencies across the country as part of a pilot program to conduct risk and vulnerability assessments of their systems and create plans for climate change adaptation.

After Sandy, it doled out capital funding to help turn some of those plans into reality.

In Philadelphia, the Southeastern Pennsylvania Transportation Authority (SEPTA) received $87 million to fund seven projects it developed during the pilot program phase.

The authority’s regional rail system in particular has been taking a beating.

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Erik Johanson, manager of strategic planning and analysis, SEPTA

“We did a pre-screening process to determine the most vulnerable points in our system, and the Manayunk/Norristown line, which parallels the Schuylkill River pretty close to the level of the river, has flooded 13 times since 2003, out of a total of 21 recorded flood events in history,” said Erik Johanson, manager of strategic planning and analysis.

“So more than 50 percent of recorded flood events that have occurred on that line have happened since 2003.”

While plans focus on flood mitigation and shoreline stabilization, improving the system’s resiliency will also involve building a backup control center and power systems, and insulating bare copper wires that can easily trip and cause signal failure.

In general, extreme temperature changes and powerful storms make any transit system vulnerable to failure.

“For heat, the big things are track buckling and sagging wires, which have major impacts,” Johanson said.

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“Once it reaches 90 degrees, we have to slow the trains down, so it has service impacts.”

Snow, ice and strong winds can also lead to downed power lines, damage to signal systems and other equipment, and labor workforce issues associated with snow removal.

“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard,” he said.

Building in Resiliency

That new standard may include building with new materials and technologies.
According to the ASCE’s Herrmann, “The University of Michigan came out with a concrete that can take some tension. Concrete is a compressive material, but if it can take tension, it can prevent it from forming the little cracks that allow salty water to get into it and start the corrosion cycle.”

Monitoring devices can also be built into bridges to track ground movement.

“When it comes to settlements of soil or ground movements, those things can change just due to small gradual movements, but can also be drastic. It has impact on the stability of a structure,” said Guido Benz, head of engineering and construction at Swiss Re Corporate Solutions.

“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s. — Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s.”

When bad weather strikes, lower salt and salt-free mixtures can also be used on roadways to melt ice. There are also new high-performance forms of concrete and steel, which are less permeable, more resistant to corrosion, and higher strength.

“But those things come with a cost,” Herrmann said. “State departments of transportation have hard decisions to make — what to do with limited dollars. Do they do maintenance, repairs or replacements with new structures? Maintenance can get put off, and it just gets more expensive the longer you put it off.”

By Bojan’s estimates, “It’s probably at least 20 years to uncork this. These projects are all very long term and take a lot of planning.”

Critical infrastructure may also be delayed due to lack of will.

“Infrastructure is not sexy, for lack of a better word,” Bojan said.

“People are much more likely to want a park on the lakefront. They’ll spend $150 million for that, but to spend $100 million for a viaduct, for example, they react negatively.”

Finding Funding

Lack of funds is another primary reason that necessary upkeep and upgrades to transportation infrastructure have not been made.

Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions

“Investments needed are in the billions of dollars. They’re massive numbers. The big question is: Where will the funds come from?” Benz said. The ASCE estimates it will take a $3.6 trillion investment by 2020 to bring the many components of America’s infrastructure up to an acceptable standard, and that total could increase if higher-strength, weather-resilient tools and materials are considered.

The federal government may invest in rebuilding efforts after a disaster, but these long-term projects need a steady stream of capital for maintenance.

Public-private partnerships (PPPs) are one way to attract investors to costly infrastructure projects.

“Models that bring in private investors but also involve project parties in long-term operational contracts generate revenue to maintain the structure. Achieving proper maintenance and keeping infrastructure upgraded is the critical element,” Benz said.

“In times of financial difficulty, maintenance gets cut short, so the quality will decay over time. So the benefit of the PPP approach is that the upkeep as well as the operations of the infrastructure is outsourced, and that presents a business opportunity for the private parties. From the investor’s point-of-view, it’s attractive because they can make a profit off of tolls, for example, and sell the property back when their contract is over.”

Other experts say a fuel tax increase is necessary to move projects forward at a steady pace. As vehicles have grown more fuel-efficient, the fuel tax percentage has remained static, meaning that more miles are being driven while fewer funds are collected. The revenue can’t keep up with the demand for repairs, upgrades and maintenance.

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“The fuel tax needs to be raised an additional 40 cents to a total of 65 cents. The federal diesel tax hasn’t changed since 1993,” said Aon’s Brockinton.

“The American Trucking Association actually is pushing for higher taxes now,” HUB’s Bojan said.

“Freight is good, profits are up, and they’re saying, ‘We need to improve our lanes and infrastructure so we can improve our throughput, otherwise we’re just getting clobbered by constraints.’ ”

Planning for the Storm

The Environmental Protection Agency predicts that unless greenhouse gas emissions decrease substantially, temperatures will continue to climb, the world’s oceans will become more acidic and the frequency of severe storms and precipitation levels will increase.

Failure to address the risks to infrastructure will not only worsen congestion, but threaten to totally shut down transit if roads, bridges and rails become too dangerous to use. Safety also becomes a major issue.

Mark Brockinton, managing director, transportation and logistics practice, Aon

Mark Brockinton, managing director, transportation and logistics practice, Aon

“Certain insurance companies have products insuring against a loss a company might have within the transportation infrastructure, such as a port delay, local embargo, or a natural disaster,” Brockinton said.

“The products would include business interruption, contingent business interruption, trade disruption, political risk, logistics insurance.

Certain companies will insure risks without an actual loss of product under certain circumstances, which would include a delay or non-delivery of product due to a strike or natural catastrophe.

“A well-performing transportation network keeps jobs in America. It allows businesses to expand, and it allows businesses to manage their inventories and transport goods more cheaply and efficiently.”

Benz of Swiss Re said companies should view infrastructure failure as an “operational risk,” and mitigate it by building redundancies into their supply and delivery chains. As harsh weather presents an ever-growing challenge, it becomes more and more important for risk managers to “always have a Plan B ready to go.”

Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]