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The reauthorization of the federal transportation funding program - previously known as TEA-21, an acronym for the 1998 Transportation Equity Act for the 21st Century - will eventually have a significant impact on the region's transportation construction industry. When that impact hits is still a little unclear, but at presstime, a deal was still pending.
It's been a long time coming. TEA-21 ran out in 2003, and federal transportation funding had since been provided through a series of eleven short-term extensions. While the level of federal funding has remained relatively consistent with previous spending during that gap, the extension scenario has challenged the ability of some DOTs to do long-term planning.
It has been especially vexing in North Carolina, for example, where the state transportation department has been struggling with its own state funding issues and where any infusion from a new bill would help, said Berry Jenkins, North Carolina director of the Carolinas AGC's highway division in Raleigh.
The lack of a long-term bill "is actually hitting us worse now than it ever has," he said in July. "In the past we've always had a pretty strong state-funded cash balance available, where the state program was as large as the federal program. But that's no longer the case. This federal reauthorization is very critical."
The North Carolina Department of Transportation announced early this year that it had spent down its state program much more quickly than it had originally planned and had indicated it would cut a significant list of projects.
North Carolina's more pressing situation aside, it was clear that no matter if and when the legislation becomes law, it will certainly not be everything regional industry officials had been hoping for.
History While secure, long-term federal funding is critical to the transportation industry, and almost any multiyear program is preferable to year-by-year extensions, the industry isn't as excited about this bill as it was about TEA-21, even though average annual funding will be much higher.
For starters, TEA-21 came close to delivering the level of funding the industry sought at the time - including a notable shift of 4.3 cents of the federal gas tax from the General Fund to the Highway Trust Fund. The latest bill does not.
Though he said it was still "premature to speculate," David Bauer, senior vice president for government relations with the American Road & Transportation Builders Association in Washington, D.C., said, "I don't think the macroinvestment levels are going to be nearly as dramatic of an increase as we saw under TEA-21.
"There clearly was an appetite within Congress to try to approach a TEA-21-like increase," Bauer continued, "but they just have not been able to overcome the hurdle that the administration has put in front of them as far as the bill's overall cost."
Early on, ARTBA supported a $375 billion bill proposed by House Transportation Chairman Don Young, Republican from Alaska. That figure was based on a U.S. Department of Transportation estimate of the necessary investment required to maintain and start to improve the nation's transportation system.
The Bush administration found that level completely unacceptable, citing a negative impact on the budget and the need to direct funding to Iraq. While the final bill is $286.4 billion, the Bush administration has indicated it would accept $284 billion as its upper limit.
ARTBA and others have been frustrated by the inability to achieve that higher funding level of $375 billion. A recent editorial in Engineering News-Record chided industry advocates for seeking an unrealistic level of investment, considering the other current budgetary constraints. ARTBA President and CEO T. Peter Ruane responded passionately.
"It's baffling to us that the industry's leading publication would tacitly endorse a $284 billion highway/transit reauthorization investment measure that could actually provide no growth for the federal transportation construction market over the next four years," he said in a letter to the editor.
Citing the recent and ongoing impacts of increasing prices for some construction materials, Ruane added, "If this trend continues for just one more year, a $284 billion reauthorization would lead to declines in purchasing power for all states, meaning the bill would not allow progress in alleviating congestion or addressing the nation's crumbling infrastructure."
Indeed, officials with the South Carolina Department of Transportation have estimated, for example, that if the recently completed $540 million Cooper River Bridge started construction today, increased materials costs would add about $200 million to its final price.
State Impacts The final bill was shaping up at a $286 billion investment level, just above the House's $284 billion version and about $9 billion below the $295 billion bill the Senate passed overwhelmingly in May. While the details could certainly change, the impacts on the Southeast region's four states were also becoming apparent.
According to ARTBA, the two individual bills contained the following funding levels over the life of a six-year program for the four states in Southeast Construction's territory - with the final figures likely ending up closer to the House's numbers:
* Florida - nearly $9.2 billion from the House bill and nearly $9.8 billion from the Senate's.
* Georgia - slightly more than $6.7 billion from the House and about $7.25 billion from the Senate.
* North Carolina - almost $5.4 billion from the House and $5.8 billion from the Senate.
* South Carolina - $3.1 billion from the House and $3.36 billion from the Senate.
Using the numbers from the House bill, the average annual allocations for each of the four states could shake out this way: Florida - $1,528,357,462; Georgia - $1,121,048,669; North Carolina - $897,508,495; and South Carolina - $517,543,181.
There are a couple of different ways to look at those annual numbers. Compared to TEA-21, they're much higher. Based on the House's legislation, each of the four states would receive at least 28 percent more in federal funding than they did under TEA-21, with South Carolina achieving the smallest growth of 28 percent and Florida attaining a roughly 32.6 percent improvement.
The new bill would mean about $113 million in increased annual funding for South Carolina, about $206 million more for North Carolina, almost $250 million per year for Georgia and more than $375 million extra for Florida.
Those numbers are only averages compared to TEA-21 and do not represent an overall boost over current funding levels. Compared to recent funding, the amounts included in the House bill have been estimated at providing about 5 percent per year growth. In fact, all four states would see slightly reduced funding in FY 2005 compared to FY 2004. (Since current funding has been accomplished through extensions, the FY 2005 funding is not yet complete.)
Modest improvements would then occur through the life of the bill, currently tagged as expiring in FY 2009. With only gradual escalation in federal funding through that period, it's easy to see the reasons for ARTBA's concerns about the possible future impacts of continuing escalations in the costs of materials.
Regional transportation officials expressed a mix of hope, frustration and resignation.
"Certainly having a permanent bill in place will be a benefit, just knowing what the expected funding will be, and certainly the higher dollars will be a benefit," said Dan Gentry, policy analysis bureau chief with the Georgia Department of Transportation. "We could certainly use and would have liked to have had some of the higher funding level. More is always better, but we will be getting a significant average annual dollar increase."
More to the point, Georgia Gov. Sonny Perdue's Fast Forward program will impact the state's funding as much or more as the federal program. Enacted in 2004, the bonding program will use state and federal dollars to accelerate approximately $15.5 billion in projects over a six-year period.
The situation is more dire in North Carolina.
"We anticipate there would be roughly $100 million in additional federal funding (compared to current funding)," said Jenkins with CAGC. "This bill might help boost NCDOT's program by maybe 10 percent, which would be a help, but it's not going to solve all of the problems and would not get (funding) up to where it had been in the last several years. Obviously, the quicker the reauthorization process is completed ... the better we all are, so we can make plans."
South Carolina's funding levels are similarly stressed - but have been that way for awhile. Before TEA-21, the state received back only about 71 percent of the federal highway taxes it collected, and it has not had an increase in the state fuels tax for about 17 years. The SCDOT has not funded its resurfacing program for the past five years, and it has the highest death rate for motorists in the country.
Even with a new program, "We're still going to be lacking," said Sammy Hendrix, South Carolina director of CAGC's highway division. Still, he said, "I don't see how it can hurt. When you're on the bottom, you're on the bottom. We welcome any help we can get."
Hendrix added SCDOT is finally indicating it will fund its resurfacing program, reportedly at the rate of about $50 million per year over a 10-year time frame. Plus industry representatives are getting together to promote an increase in the state's gas tax - despite the increasing cost of gas.
Meanwhile, Florida DOT just keeps rolling. A strong state surplus allowed Gov. Jeb Bush and the Legislature to push through growth-management legislation, which will have a significant impact on the state's transportation construction investments. The law will provide an additional $7.5 billion in funding over the next 10 years - beyond the DOT's current budget - to fund growth-related infrastructure investments.
"We're not waiting on this bill," said Marsha Johnson, director of FDOT's Office of Financial Development. "But our hope is we will be able to add some funding to our work program."
Asked to sum up the department's sentiment, Johnson said, "Probably the feeling is frustration. We all have hope that it's going to work out, but if there is still a lot of earmarks and a lot of new set-asides and new programs, it may actually hurt the state."
ARTBA's Bauer agreed that the possibility for negative impacts is still there.
"People have predominantly focused on money and formula, but there are 1,000 pages of policy matters that still have to be reconciled by conferees," he said. He added that environmental streamlining of the project approval process and enhancements to safety programs are two examples of those details that could further benefit the industry.
At the same time, Bauer added, "There are also some bogeys in there that would not necessarily be good for the transportation construction industry. And we just have to see how that works out."
Still, Bauer seemed to sum up the industry's position when he said, "As long as this has gone on, there's a great desire to finally get a bill in place and have the transportation improvement projects go forward."
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