Q&A Forum

South Central highway chiefs discuss concerns about budgets, costs & programs

Highway departments in the South Central region are becoming more proactive in educating the public about their needs.

A few of the reasons? Finance vehicles used to fund projects are becoming inadequate, road use continues to increase and maintenance costs are skyrocketing.

To provide a platform for the heads of the five state highway departments in the South Central region, South Central Construction prepared a list of questions addressing their respective construction environments, and asked each to give written responses.

Participants in this question & answer forum included Joe McInnes, director, Alabama Dept. of Transportation; Dan Flowers, director, Arkansas State Highway and Transportation Department; Johnny Bradberry, secretary, Louisiana Dept. of Transportation and Development; Larry “Butch” Brown, executive director, Mississippi Department of Transportation; and Gerald Nicely, commissioner, Tennessee Department of Transportation.

Following are the questions and the participants’ responses.

advertisement

Q: How is your state’s budget for 2007-08 shaping up?

Gerald Nicely, Tennessee Dept. of Transportation: Compared to last year’s budget, the FY 2007 - 2008 budget is about $62 million greater in total.  The major uses of these funds are in bridge and road maintenance ($34 million), aeronautics and rail projects ($11 million), transit program ($7 million) and industrial access roads ($5 million).

While the dollar amount budgeted for the maintenance of bridges and roads has increased, this increase has only partially offset the tremendous rise in the cost of maintenance materials. Over the last four years, the maintenance budget increased about 12.5%.  However using the most recent data (through 2006), the four-year price increase of steel, petroleum-based items and other materials has been over 50%.

Dan Flowers, Arkansas State Highway and Transportation Department: Our revenues have been essentially flat for several years, so our budget is basically the same this year as it was last. The exception this year was some one-time money we received from the surplus in our state’s general revenue fund. Arkansas had a $900 million surplus in general revenues last year. 

Even though we (AHTD) are not an agency that is funded from general revenues, the governor and the legislature thought it would be appropriate to provide $100 million from the surplus to help us, as well as the cities and counties, meet our mounting needs. According to our traditional formula for dividing road user revenues, the AHTD received 70 percent, or $70 million, while the cities and counties received $15 million each. This one-time infusion of money is funding an overlay program this year and next. Without those funds, we would not have had an overlay program in this biennium.

Joe McInnis, Alabama Dept. of Transportation: We do not expect any major changes in funding as we enter the new budget year, either from federal sources or state sources of revenue. In Alabama, our state gasoline tax collections are at best level over the past few years and we can’t assume any changes in that. We will continue plying away at the projects in our Five-Year Plan while keeping enough flexibility to deal with any major issues that may arise unexpectedly.

Larry “Butch” Brown, Mississippi Dept.of Transportation: The budget is roughly the same as last year, within a few $100,000 of a billion dollars. We will still have a billion dollar budget for Fiscal Year 2007-08 and we are already looking at approximately the same budget for Fiscal Year 2008-09.

Johnny Bradberry, Louisiana Dept. of Transportation & Development: Louisiana DOTD received a $650 million one-time supplemental appropriation for the 2007-08 fiscal year, which began July 1. This money basically doubles the workload in our regular highway priority program, so managing the extra work will be a challenge for us. The one-time money does not alleviate our long-term funding problems, but we are happy the governor and legislature entrusted us with such a large appropriation.

Q: Any disappointments with federal allocations? Why or why not?

Nicely: TDOT has lost a total of $171.4 million in federal funds since December 2005. A rescission of funds means that federal dollars promised to Tennessee have now been cancelled and will not be received. Nearly 50% of the department’s budget comes from the federal government, so a reduction in these revenues significantly impacts the resources available to TDOT.  This loss of funds, coupled with inflation in the cost of construction materials, further reduces our ability to address transportation needs in the state.

In August 2005, President George W. Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act - A Legacy for Users (SAFETEA-LU). This act authorized the federal surface transportation programs for highways, highway safety and transit for the five-year period from 2005-2009. SAFETEA-LU put into place the levels of annual federal funds each state transportation department receives.  However, in the past several years authorized funding levels have been significantly reduced by rescissions.

Federal funds support a variety of programs at TDOT, such as public transit, road building and environmental programs aimed at improving air quality. Continuing federal shortfalls will force us to make difficult decisions in all of these areas, especially those programs that receive a majority of funds from the federal government.

Because we have to prepare our annual state budget well in advance of the receipt of federal funds, we use the funding levels provided by SAFETEA-LU. With the loss of $171.4 million we are unable to meet our commitments to deliver projects.

Congress is currently debating the FY 2008 Transportation Appropriations. A $3 billion rescission is being discussed. If this additional rescission happens, Tennessee’s funding will be reduced by another $64 million.

McInnis: We are disappointed with the rescissions that have taken place, but we understand the reasons for it and it’s not a challenge unique to Alabama. The states reap obvious benefits from federal funding. The only drawback at times is that federal funds require compliance with more stringent construction rules and regulatory issues.

Bradberry: We are pleased the feds didn’t hold us to the 05-06 levels, as we heard was possible. The good thing about the federal funding system is that it ensures a unified transportation network throughout the country by requiring states to comply with federal requirements. The bad thing is that there are too many federal regulations and, in Louisiana’s case, we do not get 100 percent of the funds our citizens contribute to the system.

Flowers: Arkansas is no different than other states in that regard - it’s never enough. The obligation limitation is always a problem. The public sees a large number that is supposedly going to highways, but they don’t realize we can only spend about 85% of that amount because of the obligation limitation.

The growing number of earmarks poses a potential problem as well. Funding for earmarks is not in addition to our normal funding. Therefore, the more funding you have for earmarked projects, the less you have for your regular program funding. That hurts our ability to address identified needs, especially since the congressionally earmarked projects are not always consistent with our identified needs and priorities.

Brown: Actually we are always looking for more federal allocations or obligation authorities and contracting authorities. We can always use more, but in general we’ve had a very good stable program.

We have a program that has been growing at a good steady pace each year and at the end of each year we have been very successful in picking up $20 million dollars or so of unobligated funds that were redirected from other states that did not use them and they come to MDOT. That has been a good thing for us and augments our program. The disappointments of federal allocations are very few.  We have a good working relationship with the federal program.

Q: What are your highway department’s special construction programs? How are they being funded?

Bradberry: TIMED, which stands for the Transportation Infrastructure Model for Economic Development, is a 16-project transportation development program designed to spur economic activity throughout Louisiana. It is funded through bonds, which are secured by a 4-cent gasoline tax dedicated to the program. The entire program costs about $4.7 billion and is expected to be completed by 2012.

The Surplus Fund Program gives us a chance to catch up on some of our backlogged projects. We have assigned an internal program manager to the program and have established a steering committee to ensure all of the projects are let in this fiscal year.

Because of hurricanes Katrina and Rita, Louisiana received more than $1 billion in FHWA Emergency Relief funds, most of which is being applied to the new I-10 Twin Span Bridge. Additionally, FHWA has signed off on at least another $160 million to repair roads that were submerged for weeks in the New Orleans-area floods after Katrina. Louisiana potentially will receive another $100 million as those roads continue to be assessed.

McInnis: Our main construction initiatives from a statewide perspective include continued and more focused efforts to four-lane our primary highway system. We also are concentrating on widening two-lane state roadways, especially in rural areas, to a total width of 28 ft as part of our resurfacing program. These programs are being funded using combined federal-state funds. We also have been installing median barrier protection along certain stretches of interstates, and have reduced crossover crash fatalities by 75 percent since 2003.

Flowers: We have just completed a major program, our Interstate Rehabilitation Program, or IRP.  This was a five-year program in which 355 interstate highway miles, or slightly more than half of our total interstate miles, were either rehabilitated or reconstructed. This was a $1 billion construction program financed in part by the sale of $575 million in GARVEE bonds.

These bonds have a 12-year maturity and are being retired with our federal Interstate Maintenance funds and a 4 cent increase in the per-gallon diesel tax to provide the state match. This was a popular program and our legislature has recently re-authorized us to seek voter approval to issue additional GARVEE bonds once the current bonds are retired to improve even more of our interstate miles.

Brown: We have the Highway Enhancement through Local Partnerships bond program (HELP) which is helping us greatly. Improvements being made as part of the HELP bond program include: Improvements to I-55 in Madison and Ridgeland, the S-Curve in Laurel is under construction, the Canal Road connector from I-10 to the Port of Gulfport and another part of the I-69/I-269 are soon to be underway. Those special construction programs are very important to us and 80 to 90 percent of the projects are being funded by using federal funds with the balance of those dollars coming from bonds being issued through the HELP bond program.

Nicely: The department has several initiatives underway to address safety, congestion, economic development and other transportation needs across the state.
Our three-year plan identifies both specific projects and programs available to meet transportation needs.

Our construction program for major projects utilizes the core Federal Highway Administration (FHWA) funding programs: Interstate Maintenance, National Highway System and State Transportation Program funds.

In addition, TDOT is continuing to work on the “County Seat Connector” initiative. Legislation enacted by the Tennessee General Assembly provides legislative intent that the TDOT connect each county seat to the interstate system via a four lane facility. There have been no funds provided for this specific purpose; however, the department does consider this intent when preparing the annual work program.

Q: Job costs & planning: How do you plan for the future in light of cost fluctuations?

Flowers: That is a tough task that all states are facing. In our current STIP (2007-2010), we adjusted project costs upward at a rate of 6% per year. This is based on the increase in the construction cost index in Arkansas over the last five years. We believe this gives us a truer picture of actual costs, particularly in the later years of the STIP.

Another way we’re addressing the fluctuating costs issue is by breaking more projects into smaller pieces.

This is particularly helpful in larger projects where the surfacing aspect of the work might be a couple of years away. By awarding a contract for the grading and structures work now and waiting to award a separate contract for the base and surfacing work, we are able to avoid some of the impacts of price spikes or panic pricing. It doesn’t always save money, but it has helped our agency and the contracting community in addressing the cost issue.

Given the volatility of the cost of some products and commodities, it’s almost impossible to predict future costs with any accuracy.  All of us are hoping for a downturn in inflation and an upturn in revenues.

Brown: It is very difficult to plan for the future with cost fluctuation. We are now kind of settled into the act that the costs are up and will continue to increase. We have adjusted all of our cost planning and calculations by about 30 percent over where we were just two years ago. The cost of steel, concrete, labor and dirt have all gone up. We have had to make those adjustments and consider an inflationary trend for the future.

Bradberry: Cost increases have hit us hard and limit our ability to keep up with our preservation and capacity programs. We now are establishing a new position of construction estimator in the project management group. This individual’s job will be to manage the way our agency arrives at estimates and to teach others within the agency these new techniques so we can better plan our program from year to year.

McInnis: We try to maintain a core staff within the Department of Transportation to manage our normal ongoing construction and maintenance programs, and we use consultants for program peaks or specialty work. Our use of consultants has gone down in recent years. As we move forward, we are finding it necessary to occasionally move planned projects from one fiscal year to the next within our Five-Year Plan, with some projects near the end of the plan being pushed into the five-year next planning cycle.

Nicely: With respect to construction activity, we have simply delayed some existing projects and put a hold on adding new projects to the pipeline until our funding situation becomes move stable and predictable. Our 25-year long-range plan was completed in 2005, and our goal is to adhere to it even while dealing with short-term fluctuations.

Q: Any special initiatives for addressing deteriorated roads & bridges in the state? Are you making any headway?

McInnis: We just completed a special program funded by bonds that replaced nearly 600 county bridges statewide. We will continue using available resources to improve roads and bridges based on our assessment of where the greatest needs exist. We also have developed a bridge priority evaluation program to better evaluate our most critical bridges to make more efficient use of our bridge dollars.

Flowers: We have already begun looking at various funding options for the 2009 legislative session, and the governor has indicated that highways will be a priority in that session.  We have determined that we will need an additional $120 million per year just to maintain our existing highway system. That does not include major widening projects to address congestion or capacity, nor does it include significant work on our state’s Congressionally-designated High Priority Corridors.  So while we don’t have any firm plans in place at this time, we are hopeful that a workable solution can be reached prior to or during the next session.

Brown: We have a very good maintenance program through our Vision 21 program. We have made great strides in road construction, reconstruction and maintenance. Our bridge program is exemplary and that is augmented by what is being done on the deficient and lightweight bridges through State Aid, which is a division of MDOT. We provide the funds to the State Aid Bridge and Road Program and they in turn manage those expenditures.

Nicely: TDOT utilized the FHWA’s Highway Bridge Rehabilitation and Replacement Program (HBRRP) for the replacement and repair of bridges both on (State Routes) and off (local road) the state system.  Similarly, FHWA Interstate Maintenance funds are used for our interstate resurfacing program. FHWA State Transportation Program funds make up about half of our state route resurfacing program with state funds comprising the remaining portion.

The department also utilizes state funds for certain bridge repair activities on the state highway system. TDOT takes considerable pride in the condition of both our road surface and the bridges throughout the state. Maintaining these facilities is one of our top priorities and is echoed by the public through customer service surveys.

As a side note, the department also provides funding assistance to county highway departments through our state aid program, which provides funds for resurfacing and bridge repair on county roads.

Bradberry: We have increased the budget partition for preservation. Much of that increase has come at the expense of increasing our capacity budget, but we believe you have to fix the leaking roof before you add another room. Unfortunately, because of limited funds and increasing costs, we are falling further behind in our preservation and maintenance efforts.

Q: What are the major challenges facing your department in the next fiscal year?

Brown: I think the word fiscal there is the most important thing. We are always trying to find additional funds. We are afraid that our federal funds are going to dwindle. Fuel tax collections are going down because people are traveling less due to the high cost of fuel. Consequently, we are receiving fewer fuel tax funds.

We are out in the market now trying to develop public/private partnerships where we will use funding from the private sector to construct highways. We will in turn lease those highways to a private firm or consortium and they will charge for the use of the newly constructed roads. At the end of a 40- to 50-year term, the ownership of the road will go to the state. It is a major challenge finding funds for roadway construction and that is where we are at right now.

Bradberry: Funding is always an issue and will continue to be an issue for us until more long-term revenues are secured. Because we have a large amount of surplus funds that were appropriated to us this year, our immediate challenge is to manage all of the work in an efficient manner, to stay focused and continue with our efforts to improve our performance.

Nicely: At its last session, the Tennessee General Assembly gave the department authority to develop two pilot toll projects and, for the first time, authorized design-build project delivery for highway projects.  Implementation of these two initiatives will be a major challenge in the coming fiscal year.  In addition, the department is working to develop a series of alternative financing mechanisms as the state grapples with the problems of an aging transportation infrastructure, inflationary impacts in construction, federal rescissions and relatively flat revenues.  Finally, the department will see a major emphasis in the coming year on streamlining of the project development process itself.

McInnis: Our biggest challenge remains maintaining our existing system while still trying to address the need for greater capacity.

Q: What do you feel is your greatest accomplishment while in office?

McInnis: I am very proud that we resolved a long-standing racial discrimination lawsuit against the Department of Transportation that drained millions that would otherwise have been used to improve Alabama’s roads and bridges. We achieved full compliance with the terms of the settlement, including ensuring a fair system for hiring, promoting and training all employees, and we are also free from the legal expenses that drained money away from our transportation programs. I am also proud that we have implemented a management philosophy that enables us to operate and manage transportation projects based on safety, need vs. want, and the potential for spurring economic development.

Flowers: Our agency has experienced several accomplishments in the last 13 years, and I’m just fortunate to have been its director during that time. The construction of I-540 in northwest Arkansas was a tremendous accomplishment in terms of enhancing safety, not to mention the engineering challenges that were met in the planning, design and construction of an interstate highway through the Ozark Mountains.

Serving as the lead state and chairing the steering committee for the development of the I-69 corridor from Mexico to Canada is another highlight. Many innovative processes have been developed and used to help streamline the environmental process on that project. I’ve already mentioned the IRP, but that was a major step for our state in that it marked the first time in 50 years that bonds were issued by the Highway Commission to fund major highway improvements.

We’ve also recently established a mechanism for local governments to create Regional Mobility Authorities, or RMA’s. This will be a valuable tool that local governments can use to help themselves in addressing pressing transportation needs.

Brown: My greatest accomplishment has been that we have changed the attitude of construction time at MDOT. We are now producing twice as many projects at the same time as we were five years ago. We are shortening the planning, advertising and construction cycles. And we are also doing innovated financing. All of those things lumped together come down to a hard working team using newer and better business practices.

Nicely: The strengthening of the department’s credibility with the citizens of Tennessee and the creation of an effective partnership with local governments have been areas of emphasis and considerable progress.  A scientifically conducted customer satisfaction survey in 2006 shows that strong majorities of both the general public and our local government partners feel the department is moving in the right direction and trust TDOT leadership to make the right decisions. These relationships will be needed as the department moves to deal with the daunting challenges ahead.

Bradberry: I believe we have started the process of turning DOTD around in terms of striving for improvement, and being more responsive to legislators and the public. We’ve gained the confidence of the legislature, which is a huge accomplishment, and we have empowered employees to embrace a culture of change for the sake of continuous improvement. When we set up a change management group, we were taking the first steps toward institutionalizing the idea of continuous improvement. Through that effort, we also have demonstrated that this organization can withstand a 500-employee reduction and still produce quality work.