Inflation, gas-sipping vehicles and increases in the use of mass transit has put the U.S. Department of Transportation’s highway funds on the brink of insolvency, and unless Congress acts immediately, the agency will be out of money by the end of the year.
And that, said Oregon Department of Transportation spokesman Gary Leaming, could mean delays for Brookings’ planned Railroad Street redesign, and the county’s funding request for two new Coastal Express vans and repaving a 4-mile stretch between Sixes and Port Orford.
“It’s all kind of speculative at this point,” Leaming said, referring to what might happen at the Congressional level. “If you triage funding, you’re going to be aiming more for preservation than building new facilities — keeping and maintaining what you have.”
Brookings city officials have requested $3 million from the State Transportation Improvement Program (STIP) for work on Railroad Street, and Curry County has asked for $206,000 to replace two transit vans for the California-to-Coos County route, and needs $2 million for the Sixes-to-Port Orford paving project, Leaming said.
Money comes to the state transportation departments and then is doled out first to federal and then, state, highway construction projects, based on evaluations made through the STIP.
The problem, he said, is that consumer inflation has increased more than 60 percent since 1993, cars are more efficient and people are driving less. The result? Far less gas-tax revenue that is now threatening the federal agency with a long-term deficit.
Transportation officials at the federal level are awaiting Congressional action, as well, according to memos sent from them to the states.
“The department will continue to take every possible measure to fully reimburse your state for as long as we can,” wrote U.S. Department of Transportation Secretary Anthony Foxx in a letter to state transportation officials July 1. “But as we approach insolvency … we will distribute incoming funds in proportion to each State’s federal formula apportionment in this fiscal year.”
Since 2008, Congress has made up the gap between revenue and spending by transferring $55 billion into the Highway Trust Fund. But those funds will be gone this year and, beginning in 2015, the trust fund will run a deficit of $15 billion a year.
To address the revenue shortage for the long term, U.S. Rep. Peter DeFazio (D), senior member of the Transportation and Infrastructure Committee, introduced a bill last month that involves eliminating the 18.4 cents-per-gallon federal tax and replacing it with a tax of $6.75 per barrel of oil as it enters a refinery.
The bill, titled the “Repeal and Rebuild Act,” would generate enough money to pay for a six-year, $324 billion surface transportation bill. It would also be indexed to inflation, rising above $13 by 2024.
“There are a lot of ideas, but nothing’s really gelled yet,” said DeFazio’s spokeswoman Kerry Arndt. “We’re thinking what will be most likely (passed) will be a short-term fix, as this Congress is incapable of doing anything of substance. We can’t just keep limping along.”
Various proposals to increase the federal gas tax have been discussed in Congress, but none have taken root. The tax currently stands at 18.4 cents per gallon and has not been increased in about 20 years.
“That’s a nonstarter for a lot of people,” Arndt said. “Just the idea of raising a tax is really difficult in these times. I don’t think anyone’s taking that one too seriously yet. But at the end of the day, the money has to come from somewhere. The question is how to do it.”
A second consideration is the effects an insolvent trust fund would have on the private sector, she said.
“Not only will our roads be in total state of disrepair, we’d lose so many jobs,” Arndt said. “We don’t need that right now.”
Leaming said it’s too early to predict what might happen.
“We can address the short-term cash flow issue, but in the long run Congress needs to address the challenge. They might come up with a plan to infuse the fund with general fund dollars or come up with some other way of funding. The clock is ticking.”
ODOT has already postponed the next STIP cycle, which includes the three projects in Curry County.
The fix in August
Until a long-term solution is agreed upon, beginning August 11, the federal agency will begin doling out funds to each state twice a month, rather than on the “same-day” basis it currently does. Each will receive a portion of the money the federal government owes to the states — in effect, forcing states to float the federal government a loan, an ODOT press release reads.
Oregon will receive $482,423,497, or 1.27 percent of the allotment. The states garnering the largest share — Texas and California — will receive $3,331,596,800 and $3,542,468,412, respectively.
ODOT estimates this shortage in federal reimbursements to Oregon could run to $40 million or more in some of the peak months of the summer construction season. Based on last year’s reimbursements to Oregon, if Congress doesn’t address the shortfall by the end of November, ODOT could be forced to float the federal government a loan in the range of $50 million to $110 million, Leaming said.
County Roadmaster Dan Crumley isn’t sure how the situation could affect Curry County’s unexpected repairs that crop up after rain storms wash away sections of road or cause parts to sink.
When that occurs, ODOT asks for reimbursement from the federal government, he said, and no one is sure if those funds will be available as readily.
Currently, the county road fund receives about $250,000 a year from state and federal gas revenue for road projects. Those funds are spent on county roads — and lately, by county commissioners spending money from that pot to pay for sheriff patrol deputies.
For the current construction season, the Oregon Department of Transportation (ODOT) has sufficient funds in temporary reserves to weather a lapse in federal funding — at least for a couple of months — without having to shut down active construction projects and send contractors and workers home, ODOT officials said.
And the state agency will continue to pay contractors on behalf of local governments for federally funded projects even if U.S. DOT is unable to reimburse these costs, taking on debt on behalf of local governments.
However, projects slated to get underway in 2015 may be impacted. If by the end of 2014 Congress has not taken action to provide funding for all of the 2015 construction season, ODOT will have to slow down project bidding schedules for next construction season to ensure the agency isn’t committing to projects the federal government will not actually fund. This could affect all federally funded projects.