Critical Infrastructure for Texas Growth
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Critical Infrastructure for Texas Growth PREPARED BY: Critical Infrastructure for Texas Growth Prepared by: IHS Markit March 19, 2019 1 TABLE OF CONTENTS Executive Summary ....................................................................................................................................... 4 Chapter 1: The Texas Economy ..................................................................................................................... 5 Current Conditions .................................................................................................................................... 5 Near Term Forecast .................................................................................................................................. 6 The Regional Economy .............................................................................................................................. 6 Oil & Natural Gas ...................................................................................................................................... 7 Long Term Forecast ................................................................................................................................... 8 Chapter 2: The Oil & Natural Gas Economy ................................................................................................ 30 Chapter 3: Roadways .................................................................................................................................. 39 Transportation Infrastructure and the Economy .................................................................................... 39 Costs of Congestion ................................................................................................................................ 39 Current Conditions .................................................................................................................................. 40 Near Term and Long-Term Outlook and Needs ...................................................................................... 42 Specific Projects ...................................................................................................................................... 43 Ongoing ............................................................................................................................................... 43 Proposed ............................................................................................................................................. 49 Chapter 4: Bridges ....................................................................................................................................... 61 Bridges .................................................................................................................................................... 61 Current Conditions .............................................................................................................................. 61 Near Term and Long-Term Needs ....................................................................................................... 62 Specific Projects ...................................................................................................................................... 63 Ongoing ............................................................................................................................................... 63 Proposed ............................................................................................................................................. 68 Chapter 5: Ports .......................................................................................................................................... 76 Port Facilities ........................................................................................................................................... 76 Commodity Flows ................................................................................................................................... 77 Water Transportation Sector .................................................................................................................. 78 Total Water Transportation Sector ......................................................................................................... 79 Chapter 6: Power ........................................................................................................................................ 84 2 Chapter 7: Water ........................................................................................................................................ 89 Infrastructure Investment: Water........................................................................................................... 89 Chapter 8: Impacts By Sector ...................................................................................................................... 91 Chapter 9: Economic Impact ....................................................................................................................... 96 Infrastructure Investment ....................................................................................................................... 96 Direct Economic Impact .......................................................................................................................... 97 Infrastructure Investment Boosts Private Sector Productivity ............................................................... 98 Infrastructure Investment Enables Economic Growth ........................................................................... 98 Economic Impacts of Increased Infrastructure Spending in Texas ....................................................... 106 Appendix : ................................................................................................................................................. 109 3 Executive Summary The Texas economy is forecast to continue to attract over 200,000 new residents annually though international and domestic migration. The total population will expand from 28.7 million in 2018 to 40.9 million in 2048, a 44% increase. Job growth will slow from 2.1% to 1.3%. Income gains will average 5.1% annually over the next 30 years, 3.1% in real, inflation-adjusted terms. Wages and salaries will grow 5.3% per year, boosting average wages by 4.1% per year. Spending on infrastructure in Texas is projected to average $38 billion (real 2012$) per year going forward to 2048. This is up from $29.2 billion in 2017. The major components are $18 billion for highways and streets, $8 billion for electricity and power transmission, and $6 billion for water and sewer. The spending itself is an important part of the economy, providing jobs and income to millions of Texans. Infrastructure spending directly represents 1.6% of gross state product (GSP). Indirectly, it generates a multiplier impact on the economy. In this case, the 1.6% of GSP has a positive impact equal to 2.9% of Texas’ GSP. This translates to $53.9 billion for 2019 ($50.2 billion in real, 2012$), and an average of $70.3 billion per year in real terms over the next 30 years. The growth forecasts contemplate foreseen market conditions that will influence development. The estimates assume no adverse policy constraints will be introduced that will negatively impact the ability to construct infrastructure vital to anticipated growth. Should policy barriers be introduced that inhibits infrastructure expansion in any given sector, the impact will reverberate throughout all portions of the Texas economy. Infrastructure spending expands the capital stock of the Texas economy, drives the production and delivery of goods and services, and positively affects business and household incomes. Investments in infrastructure have been estimated to increase productivity in the private economy. By 2048, this increased rate of economic growth will generate a 7.2% increase in GSP for Texas, or $268 billion. On average over the 30-year period, GSP increases by $168 billion. Infrastructure investment is critical to the economic well-being of Texas. These investments enhance mobility of people, goods and services, and power and provide our citizens with increased business and work opportunities. These investments affect the health and well-being of urban and rural communities. Also, continuous re-investment is important to sustaining and advancing Texas’ competitive advantage in the worldwide marketplace. 4 Chapter 1: The Texas Economy Current Conditions In the past 30 years, the pace of economic growth in Texas has outpaced that of the US by over 50% (3.6% gross domestic product per year for the state vs. 2.3% for the nation). The growth differential was especially pronounced in the early part of this decade, but Texas slumped in 2015-2016 as oil prices retreated, depressing local incomes and oil and gas investment. As prices recovered the state resumed its leading role. Through 2018, the Texas economy continued to experience robust growth thanks to the rebound in the upstream oil sector. For 2018, Texas employment grew by 3.3% over 2017. Oil exploration has been on the upswing since mid-2016, with Texas rig counts surging from 173 in May 2016 to 530 in November 2018. With rig counts trending higher, the sectors closely tied to energy went on an upswing after experiencing losses during 2015–2016. In 2018, the manufacturing sector, which has significant ties to upstream energy, posted 3.2% job gains. The