DOTs take on TEA-21 challenge

Highway Trust Fund fire walls and added flexibility will enable DOTs to use federal funds more effectively, but officials warn that fire walls are not guaranteed and the act is no panacea

Highway Construction Article December 28, 2000
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If they are able to withstand the flames sparked by political heat, the fire walls, built into the new federal transportation act to ensure that moneys from the Highway Trust Fund would be spent, and spent for highway purposes, will help deliver significant increases in funding for highway and transit projects in the course of the next six years.

State and local governments now face the challenge of coming up with their share of funds needed for projects in their states, counties and municipalities. “The federal government has done its job,” said Kirk Brown, Illinois secretary of transportation, “now it’s up to state’s to do theirs.”

Political posturing over the fiscal year 1999 (FY99) federal omnibus appropriations bill, passed and signed into law in late October, demonstrated that the flame resistance of the fire walls in the Transportation Equity Act for the 21st Century (TEA-21) will be put to the test by congressional appropriators throughout each fiscal year’s appropriations process.

“Some appropriators feel that their power has been taken away because of the walls,” said Billy Higgins, director of congressional relations for the American Association of State Highway & Transportation Officials (AASHTO). “Rep. [Frank] Wolf (R-Va.) has expressed displeasure. He’s critical because he says that money will be taken away from the FAA and the Coast Guard.”

According to some industry officials, Rep. Robert Livingston (R-La.), chairman of the House Appropriations Committee, introduced language into the omnibus appropriations bill (section 108) that eliminated, at least temporarily, the fire wall provision, unbeknownst to Rep. Bud Shuster (R-Pa.), chairman of the House Transportation and Infrastructure Committee. At press time, Shuster was to meet with House leadership to discuss rescinding the provision.

However, AASHTO’s Higgins told ROADS & BRIDGES, that the Livingston amendment did not necessarily eliminate the fire walls. According to Higgins, the Livingston provision involved an amendment on rules of the House that would give individual members the ability to keep road projects in their districts from going forward if they are not wanted.

“Some stories have said [the Livingston provision] opens the door for removal of the fire walls,” said Higgins. “I am not certain in actuality that that will happen.”

Media-painted panacea

Although the landmark $216 billion act has been much heralded by the industry, Higgins says that news reports that focus on the funding in the act as a cure-all have had a negative effect. “It’s a much larger bill as far as money is concerned,” said Higgins. “But there has been a lot of press about so much money being added to transportation. What needs to be understood is that there also are a larger number of entities and more interest groups that have access to those funds.”

While the act includes various innovative financing provisions, Higgins said AASHTO would have liked to have seen the act keep the state infrastructure banks segment in tact. TEA-21 retains only four of the 10 pilot state infrastructure bank projects from the preceding transportation act, the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). The states are California, Florida, Missouri and Rhode Island.

New to the innovative financing section is the creation of the Transportation Infrastructure Finance and Innovation Act (TIFIA). According to Max Inman, chief of financial management for the Federal Highway Administration (FHWA), TIFIA is a direct federal credit program for large projects of national or regional significance. “Generally, it is intended for projects over $100 million,” he said.

The debate over the act’s funding formulas was seen as a possible roadblock to passage of a transportation bill. The debate centered on the division between donor and donee states. Twenty-one donor states formed a coalition to push for the return of 100% of the federal gas tax money collected by each state and sent to the federal Highway Trust Fund. Traditionally, the more populous donor states have subsidized the federal-aid highway programs in less populous donee states in order to ensure that the federal highway system is properly maintained nationwide.

In the end, the roadblock was bypassed and the donor states were appeased as the formulas were reworked to enable each state to receive back a minimum of 90.5% of the federal gas taxes collected and sent to Washington, D.C.

While the dollars in the act are protected by the fire walls and the method in which the money is doled out to the states is more equitable, the act includes a large number of high-priority projects specifically earmarked to receive funding over the six-year period.

Illinois

“We’re basically happy with the bill,” said Illinois Secretary Brown. “We wish we’d have gotten more money, but you always want more.

“We’re really glad to see the fire wall protection. It will make it more difficult not to use the money in the trust fund for transit and highways.

“The funding is not absolutely guaranteed, so we’ll have to be vigilant in the coming years. But we can show that that is the intent of Congress. We have to be ready for the battles that will come down the pike.

“We can’t all just say the job is done and go home. There still are major challenges ahead in Illinois and other states.”

Like Higgins, Brown is not pleased with the way the act has been painted in media reports. “You’ve got some folks running around saying there’s this huge amount of money out there, but that huge amount of money is tempered. Illinois still needs $600 million more than what we get out of the federal government to pay for its highway program.”

Due to the age of the road system in Illinois, Brown said available funds are limited to addressing problems of standard road and bridge deterioration, which leaves little room for needed expansion projects in the state’s urban areas. “We are unable to earmark dollars in Illinois for expansion because there is not enough money for repair and maintenance.”

The Land of Lincoln is in line for a 29% increase in federal dollars. However, the amount of money the state receives on its return on the dollar will decrease from $1.02 to 92 cents. This is because of the reworking of the funding formula. The numbers do not reflect discretionary funding, which Brown hopes will be directed toward reconstruction of Chicago’s I-55 Stevenson Expressway and Wacker Drive.

Although the federal apportionments are of great importance, the state program will not see as large an increase in total as one might expect. According to Brown, in 1990 the state program was $1.3 billion. Before TEA-21 the program was $1.1 billion. In 1999 the program will increase to $1.2 billion. “Even after the increase, over the next five years we’ll average $400 million less than was spent in 1990. That allows us to just keep pace with the deterioration.”

Florida

“I think it’s good news for Florida and for the whole country,” said Tom Barry, Florida’s secretary of transportation.

One of the Step 21 donor states, Barry is particularly pleased about the more equitable funding distribution. “We’re getting a bigger slice of a bigger pie. Our rate of return has improved. It’s better than in the past due to the work of our congressional delegation.

“The formulas have been updated to reflect system size and not out-dated measures. So it’s a plus.”

The Sunshine State will see it rate of return increase from 79 cents on the dollar to a minimum of 86 cents on the dollar.

Massachusetts

The Bay State is the only state in the nation to have less money authorized to it under TEA-21 than ISTEA. Still, Julian Regan, deputy secretary with Massachusetts’ executive office of transportation and construction, said that from a national perspective his state is pleased with the act’s overall funding.

“It’s legislation that makes a strong statement that Congress places a high priority on transportation and recognizes the benefits of investments in transportation,” said Regan. “I am pleased with the safeguards in the bill that should maintain funding at the authorized levels. There were some good projects that were high priority projects that we were pleased to see make it as part of the legislation.”

That the state will receive less money under TEA-21 is largely a function of the act being less of a needs-based bill and more of a bill that is based on the individual states’ contributions to the highway trust fund, through gas taxes, Regan said.

“So we would’ve liked the bill, and think it would’ve made more sense for the bill, to recognize the state’s infrastructure needs,” he said. “Massachusetts, being an older state, has more maintenance needs, an older infrastructure and therefore has a greater need for money to upkeep and improve the infrastructure.

“ISTEA recognized needs and TEA-21 does not, which is something that hurt Massachusetts.

“The argument by some of the donor states was that because they were giving during the ISTEA time frame that they were somehow short-changed because they received only a fraction in ISTEA of the gas tax that they sent to Washington. But we forwarded the argument, as did other northeastern states, that if you look at overall federal dollars coming from Washington to the states for all programs and looked at overall moneys going from the states to Washington, Massachusetts, to this day, is still a donor state.

“The spirit of the bill, and the provisions are great, the fact that it did not recognize state’s individual needs, is not so great.”

The makeup of the congressional power base also affected how the state fared in the act, Regan said. “We got a generous share of transportation funds through ISTEA, which was influenced positively by the Central Artery Project and was also influenced by the makeup of Congress. Back when ISTEA was passed, the power base of Congress was more tilted toward the northeastern states and Massachusetts benefited from that. So the regional tilt in congress didn’t help us.

Regan stressed that TEA-21 funds will contribute to the nation’s overall economic well-being. “It’s going to create more jobs, not only temporary jobs on individual construction projects, but it’s also going to create more permanent jobs because the infrastructure projects create jobs that are more than just project related.

Virginia

“I think it’s a landmark piece of legislation,” said Virginia DOT Assistant Commissioner Jim Atwell.

According to Atwell, the Old Dominion will realize a 62% increase in federal funding over the six-year life of the act. Under ISTEA, the state received $415 million a year, as compared to the $671 million a year that it should receive because of TEA-21.

“It was a substantial step resolving the donor state issue,” Atwell said. Prior to TEA-21 the state received 80 cents on the dollar rate of return of its federal gas tax money sent to the trust fund.

Georgia

“For the first time, equity now exists—a minimum of 90.5% payback for each state in the nation. That beats the 74% that my state received during the six years of ISTEA,” said Wayne Shackelford, commissioner of the Georgia DOT.

“I like the size of the program, the dramatic increase,” he told ROADS & BRIDGES. “I like the fire walls that have been built around the bill. This will allow state DOTs to plan in an orderly fashion, improvements to transportation infrastructure. I like the length of the bill, the fact that it’s another six-year bill. The flexibility that was in the ’91 bill is continued. The fact that the bridge program is continued as well as congestion mitigation for known attainment areas, such as the one we have here in Georgia and greater Atlanta, is good.”

Shackelford cited with trepidation the amount of money designated for research and the amount of earmarking in the bill. “The bill will allow for improved technology, but one concern I have is if there is enough research money in the bill, as well as the concern about earmarking, which will clearly restrain what U.S. DOT will be able to do in basic research.”

The commissioner emphasized the benefits the act would have on transit’s ability to relieve congestion in Georgia’s urban areas, namely Atlanta. “I’m tremendously pleased with the amount of dollars that are in that bill for transit. The capacity of our nation’s interstate system is being seriously limited by trips in urban areas. With the amount of money in the bill for transit, the amount of new starts for transit, this will give an opportunity to move some local trips off the interstate system and on to transit.”

New Mexico

“The best thing about TEA-21 is the increased level of funding. The commitment to expand 100% of the trust funds, I think is a major move that is going to be good for transportation,” said Pete Rahn, cabinet secretary of the New Mexico DOT.

“The flexibility that they have provided us, between all of the categories is an improvement,” Rahn said. But he suggests caution in placing too much emphasis on the authorized levels of funding. “The bill tends to promise more than is going to be delivered. While we get more money than we were receiving, the downside is that in authorizing the levels, they have authorized a fair amount more than they actually anticipate is going to be disbursed to the states.

“So, I think that raises false expectations of the public as to what we’re going to be able to do.

A source of worry for Rahn is the high priority projects. “The way that the high priority projects have been structured is a significant problem for the states. To date, we have been told by the FHWA that the law has a very strict schedule over the six years as to what percentage we’re allowed to receive from Congress for these projects and we’re not allowed to pool those authorizations.

The funding schedule doesn’t allow you to go in and construct a project on an efficient time line and we’re not allowed to pool those funds to deal with all of one project at one time and then move on to the next.

The way it’s structured has really handicapped the states on how we are going to be able to undertake these projects of supposed national significance.”

Contractors back act

Although his association’s members haven’t seen much of an impact from it thus far, Brian Deery, senior director of the Highway Division for the Associated General Contractors of America (AGC), is upbeat about the future possibilities TEA-21 holds for highway contractors.

“We have a very positive reaction toward the bill,” Deery told ROADS & BRIDGES.

Pete Wert, chairman of highway contractor Haskell Lemon Construction, Oklahoma City, Okla., and this year’s AGC president, likes the bill for its size and duration. “TEA-21 is the largest public works bill in history of this country,” he said. “It gives us the ability in the next five years to do some planning. With the fire walls, the funding levels are essentially guaranteed. It allows us the opportunity to formulate a rational business plan in terms of personnel and equipment.

Just as states realize that passage of the act puts pressure on them to make good on the promise the act presents, Wert said that highway contractors also have a lot to live up to. “It places a great responsibility on us to deliver, on time, projects that people are spending their money for.”

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