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Investment Currents: Rebuilding U.S. Infrastructure

By: Nick Plawa, Trust Investment Officer, Univest Bank and Trust Co.

Over the past few months, COVID-19 has brought about unprecedented and abrupt change and challenges to many aspects of our lives. It has changed how we work, how we travel and how we interact with each other on a daily basis. However, with challenge and disruption comes opportunity, if one looks in the right places.

One area to consider in the post-COVID investment landscape is the rebuilding of the United States’ infrastructure. There was a time when the U.S. was a global pioneer in the building out of national infrastructure. During the post-World War II era and the subsequent economic expansion, U.S. infrastructure boomed. President Dwight D. Eisenhower signed the National Interstate and Defense Highways Act in 1956 which allowed for the construction of 41,000 miles of highway over a planned 10-year period. Going back further, the Works Progress Administration (WPA), a New Deal agency created by President Franklin D. Roosevelt following the Great Depression, improved or renovated 39,370 schools, 2,550 hospitals, 1,074 libraries and 2,700 firehouses among thousands of other municipal projects. It also dug more than 1,000 tunnels, surfaced 639,000 miles of roads and installed nearly a million miles of sidewalks, curbs and street lighting.

However, since then there hasn’t been any public works projects of nearly that size and scope. Roads, bridges, tunnels, waterways and more are decaying with many reaching the end of their useful lives. According the ASCE Committee on America’s Infrastructure, its 2017 report revealed an overall grade of D+ on U.S. Infrastructure. Although rails sit at a solid B, aviation, dams, drinking water, levees, and roads are all at a grade D, defined as ‘poor or at risk.’ According to ASCE President K.N. Gunalan, “Each American household loses at least $3,400 per year in disposable income due to poor and outdated roads, bridges, electric grid, water systems and more.”

COVID-19 has exacerbated some of these infrastructure problems. The pandemic’s effects on societal and economic norms has caused an estimated $23.3 billion loss in airport revenue due to a 95% decline in domestic air travel. The nation’s state Departments of Transportations are projecting a 30% revenue decline in the next 18 months. A 17% loss in annualized revenue is expected in the drinking water sector, including more than $5 billion in losses related to suspending water service and increased customer delinquencies. There have been dramatic declines nationwide of ridership on transit systems. All of this resulting in lost revenue that would otherwise be used to maintain and improve existing infrastructure.

If there was ever a time to put forth a concerted effort to revamp U.S. infrastructure, it is now. Funding, of course, on a Federal, State and Local level will be key. There are many schools of thought on how best to achieve that funding. No matter what, it will need bipartisan support and heavy involvement from the private sector. Looking beyond that, however, at the actual implementation of these improvements, it is not as simple as building some roads and bridges. Technology has improved exponentially since the nation’s initial mass build out of infrastructure and that technology must be leveraged to create an entirely new picture of what infrastructure should look like. An emphasis on encouraging the development of new, transformative projects is paramount.

One such example is the development of smart bridges that utilize sensors to automatically monitor any structural fatigue, impact damage and corrosion that a physical inspection may overlook. Researchers at several universities are exploring other smart bridge technologies, including high-performance steel, self-healing materials and wireless systems that inspect the general performance and health of bridges in real time.

These automatic sensors can be applied to many facets of infrastructure. They can be used on roads to monitor areas regularly affected by extreme weather and allow road crews to prioritize maintenance. Traffic patterns can be identified and altered in real-time as opposed to analyzing historical data. Sensors in tunnels can be used to monitor air flow, visibility and range of pollutant gasses. Water systems can be monitored to ensure quality and efficiency. Algorithms are being used to update the traffic light systems to adjust for traffic patterns and replace the woefully outdated and still widely used timer-based system. These systems can be put in place to increase adaptability and efficiency for the benefit of the end user.

Not only can technology drastically improve the efficiency of structures once in use, but methods are being developed to improve and streamline the construction of these projects as well. Building Information Modeling (BIM) software programs provide the ability to digitally design a construction project that moves beyond two-dimensional technical drawing and Computer Aided Design. BIM allows professionals at all stages, from the architects to the engineers to the building managers, to collaborate on a construction project. It not only enables three-dimensional computer-generated design but can also provide insights into functional considerations like time and cost, and even environmental impact.

This barely scratches the surface of what is possible as the country moves towards its next phase of infrastructure build out. With the proper funding and a push in the right direction, American ingenuity will prevail and push the country back to the forefront of global infrastructure modernization.

As last week’s article highlighted, COVID-19 has resulted in the leverage of technology in the workplace as people were forced to work from home. What we perceived as impossible a few short months ago is currently being done on a daily basis. Investing in infrastructure, and building it out the right way, could bring the backbone of this country into the 21st century and beyond, provide needed jobs for millions, all while improving efficiencies and quality of life for all.

 

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This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.