Montana Department of Transportation officials confirmed Friday they now expect the highway's cost will be $163 million, or about $33 million more than the $130 million budgeted for back in 2003-04, before oil shot up to $70 a barrel.
That's a 25 percent increase.
“It's purely inflation,” explained Charity Watt Levis, Montana Department of Transportation spokeswoman in Helena.
The cost of liquid asphalt for paving has increased about 60 percent in the past year alone, as the price of oil has skyrocketed from about $35 to $70 or more a barrel.
Steel and concrete - two other vital materials for road construction - increased in cost about 20 percent during the same time span, Levis said. And other costs, like the propane needed to heat oil before it's used to chip and seal a road, has gone up, too.
Labor costs apparently have not been a significant factor in the dramatic inflationary spiral in road construction costs over the past year, according to national indices.
So far, five segments of the U.S. 93 Evaro-to-Polson construction project have been bid. A few have been completed and work on others is currently in progress. Chip sealing on several projects began Aug. 14.
Three segments remain to be bid, one in December and two in February.
One stretch of road between St. Ignatius and Ronan still has not received final design approval, so it is not even in the preliminary bidding stage. A draft supplementary environmental impact statement was released just this month. Another section, through or around Polson, remains distant, since the route is yet to be determined.
Before construction began on the Evaro-to-Polson project in 2004, the transportation agency received authority to issue $160 million in bonds for financing. But the Legislature granted authority to spend only $130 million.
The state transportation agency now must go to the Legislature in January for permission to spend the remaining $30 million. Financing will be primarily through sale of bonds, and possibly some minor reallocation of funding, Levis said.
Seeking the 2007 Legislature's approval will probably not significantly delay construction, she said. The state highway agency has enough funds from its previous bond sales to bid out two of the remaining three construction segments. So only one bid will be delayed.
Legislative action in 2007 should be speedy and uncontroversial, because the federal government provides some 90 percent of the funds.
The “People's Way” project, scheduled for completion in 2009, also is a high priority for the state and federal governments.
“Not building is not an option. We are looking for a solution for this,” Levis said.
Early on, the transportation agencies made the Flathead Reservation reconstruction project a high priority. That's one reason they bid the project out in several segments, to enable multiple contractors to bid and work on various parts of the road at the same time.
Another example of the high priority given the Flathead Reservation road reconstruction is the choice of financing. The state chose a creative way to finance the project - with federal permission, of course. They issued Grant Anticipation Revenue Vehicle, or GARVEE, bonds for the U.S. 93 highway construction, perhaps the first time such bonds have been used in a Montana construction project.
GARVEE financing enables states to pay debt service and other bond-related expenses with anticipated future federal-aid highway apportionments, instead of as the funds come in each fiscal year.
“The GARVEE financing mechanism generates up-front capital for major highway projects at tax-exempt rates and enables a state to construct a project earlier than using traditional pay-as-you-go grant resources,” the Federal Highway Administration says on its Web site.
Other road-building projects in western Montana and the western United States have not been so fortunate.
Wyoming, for example, recently announced postponement of several major highway projects, primarily because of the super-sized increase in material costs. For example, improvements to U.S. highways 14, 16 and 20 between Cody and Yellowstone National Park slated for next year have now been scheduled for 2013, while work on Wyoming Highway 291 has been canceled indefinitely.
“It's incredibly expensive. The number of statewide projects we've been able to put to contract this year is about half of where we were a few years back,” Cody Beers, a Wyoming Department of Transportation official, recently told the Billings Gazette.
Another Wyoming official told the Gazette that asphalt comprised about 25 percent to 30 percent of the total cost of a road contract in years past, compared to 60 percent currently.
And in Lake County, where the U.S. 93 construction project through the Flathead Reservation is moving forward with the help of GARVEE bonds, county commissioners were staggered by this year's per-unit bid for liquid asphalt for their modest road-building and road-maintenance program.
“Last year the bid was $280 a ton; this year it was $535 per ton,” commission chairman Paddy Trusler said last week.
As for competitive bids, forget it. Only one refinery chose to participate in the bidding process this year, he said. The county accepted that bid, but bought only the dollar amount budgeted, not the total amount of road oil it planned on getting.
“The higher cost has reduced our road maintenance program from 10 miles of road in a normal year to about 2.5 to three miles of road total in the county,” Trusler said. He said paved roads that aren't properly maintained on a scheduled basis will deteriorate each winter, leading to more potholes and higher reconstruction costs in the future.
Reporter John Stromnes can be reached at 1-800-366-7186 or at jstromnes@missoulian.com
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