A spike in the cost of building materials is swelling the price tags of municipal projects like school construction and road repairs in Massachusetts, and experts say some projects will likely have to be cut back.
Asphalt is made from petroleum, so the national spike in oil costs has caused asphalt prices to jump more than 18 percent in the last year, said Christopher Bouchard, president of the Massachusetts Highway Association.
"It's going to mean less road work, less paving going on," Bouchard told GBH News. "We're going to try to get as much quality work as we can get done with the money we have, so we're going to have to obviously cut projects back to do that."
Increasing costs are forcing also construction of municipal buildings like schools to go over budget. In Lowell, the renovation of the city's high school is projected to be over budget by $38.5 million.
"The COVID-19 crisis and its economic fallout has affected nearly every aspect of life, and construction costs are no exception," Lowell's city manager and school superintendent wrote in an op-ed in the Lowell Sun this week, urging support for a larger loan for the project. "Factory closures, employee shortages and supply chain bottlenecks have led to significant increases for supplies and labor."
The price of materials like lumber are impacting cities and towns in a similar way to what many homeowners are facing as they choose to delay renovation projects, said Geoff Beckwith, executive director of the Massachusetts Municipal Association.
"Essentially, cities and towns are living under the same constraints as as the average person," he said. But communities often don't have the option of postponing projects.
"Cities and towns have to rebuild their schools," he said. "They have to try to figure out how to renovate the HVAC systems. And it's going to essentially consume more of their municipal budgets and resources."
While federal pandemic relief funding is helpful, he said, it also means cities are competing with each other for a limited number of contractors.
"And so with essentially fewer contractors per bid, we expect that labor costs will also be going up, and the general cost of projects will be going up as well," Beckwith said.
To further complicate matters, Beckwith said it's becoming more expensive for cities and towns to borrow money for projects because the Federal Reserve is increasing interest rates.
"As communities go out to borrow money to pay for these expensive construction projects and then retire that debt over 20 or 25 years, the interest rate that they will have to pay will be going up because the Fed is increasing interest rates," Beckwith said. "So it appears to be a very challenging time for likely a number of years for municipalities."
Beckwith said the impact will be a reduction in the size of projects across the state.
"Ultimately, it just means very careful management and likely scaling back the magnitude of some of the projects, while still paying more money," he said. "So it's not a good news story for municipal finances going forward."
