The ultimate cost of the Key Bridge collapse
An estimated $1 billion is just the low end of the rebuild price tag for taxpayers. The true costs won't be known for years.
Happy weekend, readers. Last week, most of us woke up to the shocking news that the Francis Scott Key Bridge south of Baltimore had collapsed. The 47-year-old bridge buckled in a matter of seconds after a massive container ship lost power early Tuesday morning and hit one of the bridge’s support pillars.
The incident has made international headlines not just for its shock value but because the bridge’s collapse has a ripple effect on our economy. This newsletter, I’ll round up what we know so far about the financial impact of the Key Bridge’s collapse on Maryland and the rest of the country.
At least $1 billion to build a new Key Bridge
It’s still too early to know how much it will cost to rebuild the Key Bridge, but one estimate from the Washington Post says it could take more than $1 billion. “That price tag does not include the cumbersome task of reopening the Patapsco River waterway that leads to the Port of Baltimore. The Army Corps of Engineers and other federal agencies will assume that cost,” the Post said.
That estimate seems like a very safe bet given that it took four times that amount to build the new Governor Mario M. Cuomo (formerly Tappan Zee) Bridge, which is just twice as long as the roughly 1.6-mile Key Bridge. In fact, a roughly $1 billion rebuild is a conservative estimate when you also consider:
The $4 billion Cuomo Bridge was complete on time and on budget. (You read that right.)
Given the rising cost of construction in recent years, the longer it takes to get started, the more the final price tag will tick up.
Lots still needs to happen first, like: clean up, reviewing rebuild proposals and selecting a firm for the project.
Where the money will come from: The Key Bridge is part of Interstate 695 and cost sharing on a federal highway project is typically 90% federal government, 10% state government. But in the case of a disaster, the feds can pick up 100% of costs for repair work done during the first 270 days after a disaster “to restore essential travel ways, minimize damage and protect remaining facilities,” the Post reports.
President Joe Biden and some Democrats in Congress have already pledged that the federal government will pay for the entire cost to rebuild the Key Bridge and so far, Maryland has received $60 million from the U.S. Department of Transportation emergency relief fund.
But: That fund isn’t enough to support the rebuild without increased appropriations from Congress. It currently has a balance of about $1 billion and receives $100 million in annual funding.
The economic impact on the port industry
The collapsed bridge is choking off access to the Port of Baltimore—a central port for East Coast shipping. The temporary closure will have a ripple effect on the supply chain, other ports and on jobs in Maryland.
The port is one of only four East Coast ports with a shipping channel deep and wide enough to accommodate the world’s largest container ships.
In 2023, reports Axios, the port handled a record 52.3 million tons of international cargo, worth about $80.8 billion.
It’s arguably one of the best-placed ports in the country as Baltimore is the closest East Coast port to the Midwest and a full one-third of the nation’s population lives within an overnight drive from Baltimore.
According to the state’s figures, the port generates nearly $3.3 billion in total personal income and 139,180 jobs are connected to the port (15,330 of them direct jobs). The Port also generates more than $395 million in taxes and $2.6 billion in business income.
Supply chain: According to Fitch Ratings, larger East Coast ports such as New York-New Jersey and the Port of Virginia “have sufficient capacity to handle additional container imports and exports and larger sized ships. Other smaller East Coast ports could see congestion and temporary capacity and labor pressures.”
Deliveries of cars, trucks and farm machinery could see a slowdown because Baltimore ranks first in the U.S. for wheeled cargo.
Permanent loss of business to other ports is a big concern for Maryland.
Economic relief: Maryland lawmakers are considering emergency legislation to help small businesses and displaced workers, and to hopefully mitigate trade loss to other ports. Details are forthcoming but according to the Sun, lawmakers want:
Financial relief such as unemployment insurance to be available to all workers (including independent contractors) associated with the port;
Help for small businesses (like crabbers) that rely on the port; and
Funding to prevent current customers from permanently diverting their business to other ports.
State Senate President and Baltimorean Bill Ferguson said legislation could allow Gov. Wes Moore to tap the state’s $2 billion rainy day fund.
Raising the pressure on Maryland’s budget shortfall
Maryland is already facing a budget shortfall this year that is expected to balloon to $1.8 million by fiscal 2028. Dealing with the economic impact of the Key Bridge collapse and paying for its share of the rebuild (an unknown cost at this point) will further strain the state’s structural imbalance—especially if the state taps rainy day funding to pay for economic relief programs.
On the plus side, the Maryland Transportation Authority would be on the hook for construction costs and its finances are stable, according to credit agency reports last week. Though Moody’s Investors Service warned that “debt for the bridge collapse and [$3.1 billion] capital program weaken MDTA’s financial position,” the agency has financial flexibility to sustain the pressure.
MDTA also has $350 million in property and business interruption insurance.
S&P Global Ratings noted that toll revenues from the Key Bridge represent 7.4% of the authority's $755.7 million in annual toll revenues and that most of the bridge toll revenue should be diverted to other MDTA-operated harbor tunnels.
Even so, the state would have to approve new funding streams or changes to the MDTA. And state lawmakers already appear divided over the urgency of Maryland’s existing shortfall.
The legislators set the stage three years ago for the current budget gap by approving a multi-billion-dollar education reform plan for Maryland schools without a way to pay for it. The need to redirect attention now to the bridge collapse will likely further delay any action on the state’s budget shortfall—and potentially make it worse.