OCTA Could Benefit From Lower Construction Costs Due to Pandemic, Analysts Say

November 12, 2020 Updated: November 12, 2020

The rise in unemployment in California during the COVID-19 pandemic will likely contribute to a drop in construction costs that will benefit the Orange County Transportation Authority (OCTA), according to economic analysts.

“We think that there was a reset in 2020 in terms of pricing,” said Wallace Walrod, chief economic adviser for the Orange County Business Council, during a presentation at an OCTA meeting on Nov. 9.

Walrod said building costs may not significantly rise until 2023, creating a “good environment” for the construction market.

This could help the county spend funds from Measure M more efficiently. The half-cent sales tax for transportation projects was approved for renewal by voters in 2006 and is projected to generate $11.6 billion through 2041.

Measure M, also known as OC Go, has completed 12 of its 30 planned freeway projects to help reduce congestion. Funds from the measure have also been used to improve street conditions, expand Metrolink train routes, and increase synchronized signals at intersections, saving travel time for motorists.

California’s unemployment rate for September was 11 percent, according to the state’s latest update, down from 11.2 percent the previous month, but up significantly from 3.9 percent in September 2019. Unemployment in Orange County was 9 percent for September, down from 9.5 percent in August but well above the year-ago estimate of 2.5 percent.

The construction industry gained 3,100 jobs statewide from August to September, but the number of available jobs remained unchanged in Orange County. Construction jobs statewide are down by 50,100 since September 2019.

“We are in unprecedented economic times right now,” Walrod said.

He said a more rapid delivery than previously expected of a vaccine for the CCP (Chinese Communist Party) virus could also positively affect projections for economic recovery. Recent reports indicate that an effective vaccine could be available by the end of the year.

“I do think obviously the shape of the recovery has been very dependent on the actual level of cases of COVID, but also the outlook for when we can get back to fully reopening the economy, fully reopening workplaces. And to the extent that the vaccine allows us to do that, probably it does influence the shape and timing of the recovery,” he said.

Walrod and his colleague, Marlon Boarnet—a professor in the Urban Planning and Spatial Analysis Department at the University of Southern California’s Sol Price School of Public Policy—said they will update their economic analyses in March 2021.

Boarnet said: “I think there’s real uncertainty ahead. My answer as a modeler would be: Continue to update the data.”

Earlier this month, OCTA directors voted unanimously to pursue an interest rate reset on a loan they took from the federal government in 2017 to help finance the authority’s Interstate 405 Improvement Project. The estimated financial savings could be worth up to $190 million, according to officials.

The highway construction project is the largest in California and aims to alleviate growing pressure on the nation’s busiest stretch of highway.

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