Experts highlight infrastructure’s role in supporting local projects

New Jersey Alliance for Action projects more than $57 billion in building expenditures over the next two years. The figure represents a 5.17% increase over the prior two-year outlook, with capital infrastructure projects from state utilities representing the largest share of the expected work.

During NJBIZ’s Construction and Development panel discussion, the intersection between public projects and private development was reflected in the analysis of participating speakers. Throughout conversation, the group also explored transit-oriented projects and the demands of a hybrid workforce, potential impacts from a changing federal administration, workforce issues, technology as a tool and more.

NJBIZ Editor Jeffrey Kanige moderated the 90-minute discussion, featuring Christopher Barchetto, member of Smolin, Lupin & Co. LLC; Cameron MacLeod, director, Real Property, Trenton Office, Gibbons PC; and Stephen Sigmund, chief of public outreach, Gateway Development Commission.

Sigmund described infrastructure as “the backbone for private development” and “a core government responsibility to help the private sector grow.”

Agreeing about infrastructure’s role as a catalyst, Barchetto said that whether or not builders are pulling back or pushing forward depends on the sectors they serve.

“If you’re a contractor and you’re doing a significant amount of public work, infrastructure always needs rehab. So … to a large degree, if there’s public funding – as long as we have a functioning federal and state government that is funded, these projects are going to have to take place,” he said.

On Dec. 21, President Joe Biden signed a stopgap spending bill, averting a government shutdown.

MacLeod said that from the developer perspective, if the infrastructure dollars aren’t there to support necessary improvements to roadways and the like, it will affect output. He referenced work underway by the New Jersey Department of Transportation to replace bridges, for example, with plans announced through 2027.

“There’s definitely a long way of things in the pipeline, but if the money goes away, those projects come to a stall,” he said. And that delay has a ripple effect. “So, there’s going to be an impact on the developing that comes [as a result].”

Don’t look back

When it comes to what’s billed as the nation’s “most urgent infrastructure project,” Sigmund offered assurances that his organization expects work to continue. He pointed to the full funding agreements GDC executed this year. Of the nearly $7 billion and almost $4 billion in federal grants, $4 billion is already assigned.

While the potential effects of a changing administration at the federal level will remain unknown in the short term. Sigmund pointed out there are checks and balances in place on Gateway.

“There is an appropriations process that’s going to take place over the years in which we need to have the committed money actually appropriated to the project,” he explained. “And that is a contractual obligation of the federal government to put that committed money toward the project by a certain date … So, the commitments are there.”

And beyond that, “There’s a lot of money already obligated. There’s a lot of construction in the ground and we have work going on in New Jersey and New York – and in the middle of the Hudson River,” said Sigmund.

Replay: Construction & Development Panel Discussion

Click through to register to watch the full panel discussion!

With talk of tariffs omnipresent ahead of President-elect Donald Trump retaking office, the panelists said the sector is taking precautions.

“We did a lot in the planning of the project to build in contingencies,” said Sigmund. “I think we have something like 4 billion [dollars] plus in contingency for the project.”

The figure, representing about a quarter of total project costs, aims to combat the slew of unknowns the work entails.

“I mean, not just the fact that it’s a long project and things change, but we’re going under the Palisades, under the Hudson River building in Penn Station for the first time, the heavy rail project, in more than a hundred years. So we don’t know everything. … the political costs of things like tariffs are built in there as well.

“It could have an impact,” Sigmund continued. “We could be dealing with it and managing it. We’re going to have to manage a lot of things.”

No matter the scope of the work, the panelists said the industry is building contingencies into planning procedures to help keep projects moving.

Barchetto pointed out that while the supply chain issues that plagued builders during the pandemic have improved, some problems still persist. “So, as the administration changes and as tariffs get put into play, you’re going to see pressure on pricing,” he said, which could create disruptions.

“And again, that will have a ripple. So pre-purchasing, I think you will absolutely see, especially on long-lead items,” Barchetto added.

GDC has been able to line up public financing as well as low-interest federal loans to keep overall costs low for local parties (New York and New Jersey). Similarly, material costs also emerge as a potentially differentiating factor from private sector projects.

Sigmund referenced the Build America Buy America Act stipulations GDC must adhere to. Part of the Infrastructure Investment and Jobs Act, that requires all iron, steel, manufactured products and construction materials used in covered infrastructure projects be produced in the United States.

As such, “the vast majority of our materials are coming from the United States, including the steel,” Sigmund said.

Storage also creates another issue — finding somewhere to house the materials you need or want to have on hand.

“If you want to purchase and leverage against price increases and you want to purchase in significant bulk, where are you going to put it? So that drives up a cost someplace else,” Barchetto said.

MacLeod pointed out that stockpiling materials can also affect the resulting built environment. “One of the interesting things is that these costs, the best way to develop around, is by, in some instances, building either denser [or] taller,” he said. “The consequence of all this is that you’re going to end up with more intense development in some areas.”

MacLeod talked about the emerging dichotomy between stick-built (structures built with wood frames) and non-ST built areas across the state—and where they’re emerging.

“[Y]ou’re seeing stick-built more in suburban areas and then as you get into the urban areas, you’re going to see more steel and then steel is going to go higher and higher,” he added, referencing the Newark skyline. “You see projects that are now taller than they’ve ever been and all the future permitting that Newark is showing are going taller still.”

Earlier in the discussion, MacLeod called out costs, availability of goods and access to infrastructure as touchstones for steel’s setting in urban environments.

Hybrid helps

Panelists agreed that in the wake of a recent exodus of professionals to the suburbs as well as an evolving hybrid work environment, maintaining Garden State infrastructure is doubly important.

“Maybe that first month [of COVID], you had business owners going, ‘Alright, we’re going to lower our overhead, get rid of all the office space, everybody works from home and we’re going to save a boatload of money,” Barchetto said.

But now he sees a hybrid scenario playing out. “I would say … probably weighted toward more office time is kind of where we’re at right now,” he said. “And you can feel [it] — drive into the city, drive around New Jersey. There’s more congestion now than there was a year ago; 24 months ago.”

According to the U.S. Census Bureau, more than 75,000 people moved from New York to New Jersey from 2021-2022 – marking the third-highest state-to-state migration in the U.S.

MacLeod drew attention to the state’s focus on transit-oriented development projects.

“Interestingly, New Jersey in the last four years inverted the scheme that it already used for parking calculations,” he explained. Instead of mandating a minimum number of parking spaces on a per unit basis, “They actually flipped it.”

“They said, here’s a cap number … based on the number of units you have to have. If you want to exceed that, you have to come get relief,” MacLeod said, adding the move put a “finer point” on prioritizing transit-oriented developments.

Throughout the state, demand for housing is reflected in the multifamily development taking place.

“You drive down the road and you’ll see many mixed-use housing developments,” Barchetto said, describing the emerging projects as “almost like mini towns.”

For Sigmund, too, the increased volume underscores the necessity of GDC’s work. He highlighted how mid-week transit ridership has returned to pre-pandemic levels, or higher.

“The vast majority of commuters into New York City – even before the pandemic, but certainly after – have come from New Jersey, as opposed to Long Island or Connecticut or Westchester. … And that’s in large part because we’ve built housing for people, and particularly multifamily housing,” he said.

“So, people are back, they’re coming to New York just like we thought they would, and a lot of them are coming from New Jersey—which is a good thing. It’s just that we have to provide a way for them to get back and forth reliably,” Sigmund continued.

Different kind of pipeline

While commuters riding the rails may instill confidence, the outlook for the workforce in the construction space is a top-level concern.

According to Sigmund, GDC has 7,500 people employed on construction projects already. However, looking ahead, he and Barchetto both called attention to an aging workforce.

Between 2003 and 2020, the percentage of construction workers who were age 55 and over nearly doubled, according to the U.S. Bureau of Labor Statistics. Meanwhile, a 2019 report found New Jersey was among states with the oldest median age for such workers (44).

“In speaking with my clients, and I would say I can make a blanket statement for contractors serving various niches, whether it’s electrician, HVAC, operators, drivers—there’s still a run on the skilled workforce,” Barchetto said. “There are less skilled workers than are needed to stack projects, which brings with it a host of other challenges.”

As a long-term, “premier” project, GDC has an advantage in the labor marketplace. “And we have project labor agreements on each of our contracts,” Sigmund said. “So, there’s a certainty among the workforce.” Even so, “there are not enough young people coming into that workforce, just in general. And that’s something that we do look at and have concerns about.”

To help turn the tide, Sigmund said GDC is developing apprenticeship programs through its project labor agreements. That effort also aims to help diversify the construction workforce, he said.

According to MacLeod, the developers he works with are also trying to build relationships with trade councils and their development centers to help fill the talent pipeline. He also credited government incentives for requirements that “really put a big focus on saying we need to do that workforce development, as well.”

As that future workforce is built, the roles its members will enter could look different while technology is further incorporated to create efficiencies in operations, construction and costs.

“The new technologies for us really are an additive that makes the project more efficient,” said Sigmund.

“Anytime you leverage technology, there’s savings, right? There has to be savings if it’s used properly,” Barchetto said, using Gateway as an example.

“Think about all the different disciplines that are on that project. And then how they have to estimate that,” he said. “If you were bidding or estimating without technology, how difficult would that be? And that’s just on the front end. Then to actually perform the work? Somebody owns that tunnel boring machine that’s going to execute that work. Without that technology, how much longer would it take to build out a project?”

Sigmund highlighted the role technology plays in building under the Hudson River now—as compared with the work that took place more than a century ago.

“We use modeling and mapping and AI to figure out where should we go? What strength should the concrete be? And you could test it before actually going into the ground … so it helps you save money,” he explained.

The GDC also uses drones to take pictures above active construction sites and over time.

In addition to keeping tabs on project progress internally, “we use it quite frankly to keep the public informed … a lot of these projects – and since they’re long term, you got to show them rather than tell them.”

MacLeod agreed that technology helps the developers he works with tell their stories more clearly to municipalities and the public. The move can help build trust and local relationships.

“Being able to do things like virtually modeling what a project looks like basically and doing fly arounds of what that project looks like,” he said.

“Steven mentioned you got to show, can’t tell. And in a lot of instances, we’re now able to show and render projects in ways we weren’t able to do 15 years ago, just by virtue of the benefits and technological advance,” MacLeod said. “The other thing that’s been really interesting is that now because of the way we have drones and we can do better two GIS mapping, that allows us to get a better sense of both of existing infrastructure, [as well as] vacant land areas, mapping our conservation areas, mapping our projected climate change areas.”

And beyond

With gubernatorial election upcoming in New Jersey, the panelists laid out their priorities for whoever steps into office next.

Again, infrastructure emerged as a common theme, while MacLeod pointed toward cutting through statewide NIMBYism.

“I know there are actually some legislative solutions that are floating out there right now and things that have been talked about as well with streamlining ways of permitting,” he said. “Housing is something that could be invaluable to New Jersey, particularly for inclusionary housing projects. It is something that is nearing such dire need of throughout the state and there are so many impediments to it already that if there were more of a streamlined permitting process for that, I think that would be something that would be invaluable to the region.”

Barchetto called for a common-sense approach.

“I think, and I hope, any and all policy makers think about what is truly important,” he said. “[W]ill dollars be available for our infrastructure? I mean, in my mind, those are one of a few line items on our country, state and local P&Ls that we have to make room. You have to have this. People want goods and services and if we don’t have infrastructure—you have to create dollars available to fund that.”

As it progresses, Sigmund said for GDC it’s about keeping the money flowing.

“There is no gubernatorial candidate, Republican or Democrat, who isn’t an advocate for the gateway project. It’s just too important to New Jersey,” he said. “But both keeping the local share portion flowing, [and] also perhaps even more importantly, helping us hammer away at the feds to make sure that at all levels of the federal government, that the commitments that have been made to the project are met.”

That said, the outlook is positive.

“I think the confidence level can be high because we’re so much further along than any other time in this project,” Sigmund said. “I mean, administrations change, politics change, and elections have consequences.”

Conceding GDC will likely need to make its case more strongly and consistently throughout the incoming federal administration, because it’s not as connected as the current one, he added, “But that’s going to happen throughout the life of this project.”