Highway Funding... The Governor's Take:

Today we received a copy of a press release from the Governor's office indicating that we in the Legislature are “wringing our hands” when it comes to funding Idaho's Highways. Many of us take issue with that characterization.

Thus far, the ideas that have come from the Executive branch for funding the ITD identified need of an additional $200M/yr have come to a total of about $20M/yr, far short of what that same branch of government is telling the Legislature the need is. The old game of “who’s got the Monkey” comes to mind here…

If we want more funding to be considered, we need to put the Executive Branch cards on the table so we can all see what we are going to play with. The Legislature has the Governor's budget proposal and it doesn't include the extra $200M, or where it should come from. Many of us are not sure just what magic hat that $200M is supposed to be pulled out of...

Getting $200M of new money from 1.4 million Idahoan taxpayers facing an unsure economy, well... you do the math. I think we need to find spending savings and combine that with a number much more feasable to the taxpayers and users.

There are some ideas floating around in the Legislature that might be able to find more money for our Highways, but most of those pull from the pockets of the taxpayers who are the first to feel the "cooling economy". If increased registrations or fuel taxes are the plan, we need to start working on those to see if we can implement those plans, let the people see them and start the dialog.

We had assurances last year that ITD would be doing a better job with the funds that they currently get and I think that they are. They showed us where they were able to find $50M in "savings" from practices that can be changed. However, we don't have the time (or money) to wait for a slow movement to efficiency... we must get a fresh set of eyes on the way we are currently spending ~$700M on our infrastructure to ensure we are delivering the biggest bang for the buck to those that pay the bills.

We are working on a form of a performance audit that will provide the department, Executive and Legislative branches ideas for better operations, policies and spending practices to ensure we are on a track for success. "If we always do, what we've always done, we'll always get what we've always got" my Dad used to say... it's time for a fresh vision and positive change, we can get that from some outside professional eyes.

We need to not only see some more ideas for "finding funds" from the Executive branch that needs it, but we need to ensure that the funds that we are pointing at the roads today are being used where they are needed in the most efficient ways possible.

Those that are "first in line" to feel a "cooling economy" are the taxpaying citizens of Idaho. Some seem to forget that while the State's revenue to be spent will suffer, it must be considered "second in line" when it comes to the "cooling economy".

We must remember that it's always easier to say we need more money than it is to find ways to get it, and especially in a "cooling economy" that’s a bit more than a “bump in the road”. The economy is the basis for the collections of taxes from business and our citizens; State’s spending must be controlled to match the economy, not the other way around.

The taxpayers of Idaho expect that if they are going to be pulling more coin out of their pockets for transportation that it will be used wisely... and we must deliver that to them.

Your thoughts?

A Road Less Traveled....

As I was returning to my office this morning from the Urban Land Institute meeting in the Grove Hotel I noticed something. After a full morning of discussions regarding how we are going to fund more transportation infrastructure (i.e. raising this tax or that fee) I suddenly realised that I seemed to be going almost twice as fast going back to the office at 11:00 am than when I came to the meeting at 7:30 am...

We discussed local option sales tax increases of up to 1 cent, increasing registrations, increasing fuel taxes, increasing property taxes... the "increasing" discussions seemed to be never ending. Everyone seemed to have a plan to fix our woes with some sort of increased taxes. We know that we have issues that need to be funded, but it was not until Gov. Otter's Chief of Staff (Jeff Malman) got up and mentioned that we are now also working on how we can better spend the dollars we do have... I know it's easier to just raise a tax here or there and throw money at the issue, but if we are not spending the money we have wisely, aren't we putting a band aid on the real problems?

Getting back to my drive back to the office... why was it that I had a much easier commute back to Meridian later in the day than I had to Boise in the Morning? Well anyone and everyone knows it's because we all need to get to work in the morning and then come home at night at about the same time.

This lead me to think that we might also have "social engineering" issue that compounds our infrastructure issue. Why do we all (repeat... ALL) need to use our roads at the same time? Typically it's due to local business desires to have their folks change shift or start their work day all about the same time.

We do have infrastructure issues that need funding and we are going to have to find those dollars somehwere. Within the mix of "increased tax solutions" that are on the table, shouldn't we consider some "social engineering solutions" as well? Just how much would it cost the state to provide incentives to business encouraging/requiring "flex" hours or a change their shift schedules to times outside of the standard morning and evening commutes? Can we compare this cost of influencing our social behavior to the millions we are talking about spending for (in the Treasure Valley) 4 to 5 hour period each day that our roads are jammed with traffic... ?

As an example, how many people at Micron alone are beside us in traffic the mornings trying to get to work? What if a company the size of Micron were to move their shift change from 7:00 am to 7:00 pm to say... 9:00 am to 9:00 pm? And what if they were to encourage their normal "8 - 5'rs" into a more flexible schedule? That single action alone could take thousands of cars out of the early morning and evening commutes and spread the higher utilization of the roadways over a larger period of time. Less time commuting means less impact on our air quality, better fuel economy and happier drivers.

Employers aren't going to resolve our lack of funding issues, but do play a major role in why we have traffic issues at certain times of every day. I hate to see us pay for and build a huge infrastructure that will only be flexed 4 to 5 hours of every day because we choose to be inflexable in our travel requirements.

We need to put some "social engineering" options on that table to resolve our transportation issues... it's going to take a package of things, this needs to be one that's considered.

Thoughts?

GARVEE, Where we are and How we got here....

Lot's of talk these days regarding transportation problems. Many of us ponder what's going on while we sit on I-84, Eagle road or Meridian road waiting for traffice to move. I think it's important to understand a bit better our transportation funding systems, how it's setup, how/what GARVEE really is and how all of it is managed.


We have a ton of transportation issues in Idaho and have dedicated as much money (a ton) to fix these issues.... I'll start with what I have learned about our Transportation infrastructure support efforts and will readily admit I don't know all the ropes but am on the fast track of learning more each day:



Idaho Transportation Department Funding
(web link here)


Many don't realize the IDT covers all state transportation needs; roads, aeronautics, bike paths and public mass transit. We will focus on the highway funds as this is where the bulk of the funding goes and where the majority of our issues currently are.


Funding for most of this comes from our fuel taxes (.18 fed and .25 state cents per gallon of gas). State taxes along with registration fees are placed into what's called a "Highway Distribution Account" or HDA. For 2008 state budget year (we are in now), the projected funds that are to be placed into the HDA will be ~$333M. From here, funds are sent to various entities as required by the Idaho Constitution: Local highway jurisdictions (county, Assistance Council, Cities and Highway Districts) receive 38% for local infrastructure operations & repairs, Idaho State Police receive 5% for operations and training. The remaining 57% goes to the ITD operations account as general funding.

It should be noted that there are some funds "taken off the top" for things like administration, bridge inspections, rail crossings and fuel tax refunds.

This distribution into the State Highway account is then combined with the federal dollars that we receive back from our .18 cents per gallon we pay. We receive ~$1.34 for every $1 we pay in federal gas taxes back from Washington D.C. due to the diligence of our federal Legislative team. Other states like NY, CA, IL and others receive back less than they pay, and fight for more funds annually... having good folks representing us back in D.C. is critical with regards to these types of arm wrestling matches. Without the strong positions that we have now, we are at risk of loosing much of this funding.

The federal funding (~$300M) combined with some other misc. funding will bring the State Highway Account to ~$525M for the 2008 that ITD uses to manage operations and maintenance costs of our infrastructure. Every year, the State Legislature looks at how ITD proposes to spend these annual funds to approve/disapprove dollars spent on various targeted projects. The objective is to ensure the "people" have a say in where we get our "bang for our bucks" through the checks of the legislative process.

Every year, internal ITD infrastructure upgrades are a part of this budget. We must ensure that the department charged with obligating the annual funds and getting "asphalt on the roads" has the capability to do just that.

Grant Anticipation Revenue Vehicle (GARVEE)

The GARVEE program is a legislatively approved authorization to sell "bonds" (a way of borrowing money) to fund for special projects up to $998M. The first year of approved Idaho GARVEE bonding was in 2006 (for the remainder of 2006 and 2007 year's budget) where $200M was authorized by the legislature for bonding.

This obligated the state to use State Highway Account funds to match currently available federal funds to pay off the interest due to the bond holders over the terms of the bonds. The objective of using GARVEE is to "borrow" funds where it makes sense to purchase items for infrastructure growth that you know will increase in cost over time. Return on Investment (ROI) must "pencil out" or be deemed as a "good investment" for the people of the state before bonding (borrowing) is authorized.

An good example of GARVEE use, would be for the purchase of easements for new roads or interchanges. With the increasing costs of land, it's wise to plan early in purchasing those easements as far in advance as planning allows. (preliminary planning is required prior to any GARVEE bonding request just to understand how much bonding is required).

We all should realize by now, that pretty much the cost of everything increases over time (unless we can figure out a way to start buying pre-made highways from Wal Mart... ;-) ), so using the reasoning of "we need to buy it now because next year it will cost more" really would be abusing the tool as it is intended. The interest payments on these bonds obligates future funds from our State Highway Account that our children will be counting on for their future transportation maintenance and construction costs. We don't want to get ourselves in a position of using more Highway account dollars to pay interest vs. putting down or repairing hard-pack!

It's therefore crucial that we wisely consider every recommended use of GARVEE bonding at all stages of it's authorization. It's "ROI" and it's long term impact on our state's Highway account's ability to provide for future critical infrastructure needed for generations to come must "pencil out". Questions must be asked if "this is the only way" to accomplish this project. GARVEE is a good tool to use for future infrastructure, but is not a tool intended for general infrastructure maintenance or building where general State Highway account dollars are intended to be used, we could end up robbing from Peter to pay Paul...

We are now betting that we will always receive our $1.34 per $1 in fuel taxes sent to the feds back into our account to cover the cost of the bonding interest payments... how long that will last is any one's guess, but my bet is not much longer. Almost all states in the nation are now in a highway "funding crunch" due to many factors. The biggest is the increased fuel economy of cars. More road miles driven on less fuel means less taxes paid to the states and to the feds for infrastructure upkeep and build out. The available federal highway funds will continue to have more and more pressure applied to help out all 50 states, that availability of future funds for the next 10 years are questionable at best. Some say 2010 is the year the funds will go upside down, having more costs than revenue available.

We are now at a critical juncture of what to do next: do we cut back on our infrastructure costs or increase our taxes to cover the costs we currently have identified? I believe we need to do a little of both. We have an ITD internal infrastructure that needs some self evaluation on how and why it spends what it spends. Almost every year the legislature approves funds for "technology" upgrades for all departments that will "allow us to do more with less"... but we never seem to get to the "less" part?

Every organization needs a periodic "self look", "houseclean" or "evaluation"... whatever you would like to call it, it's time for a good look at our internals. A good look would really go a long way in gaining back lost credibility of a department known for being an organization looking for, finding and executing programs with the people's money that got the "biggest bang for the buck".

Where are we now...

We are told by ITD that we are behind ~$250M per year in spending due to costs going through the roof across the board. Our ITD sites some excellent examples of these increased costs on various projects around the state and also provides examples of less funds per miles driven coming into the HDA. Considerations for better engineering and materials used over the years are not included in any documents I can find. One would think that pavement laid today would be better/stronger than that of 20 years ago and would be expected to last longer as well. One would consider better safety designs in both cars and trucks and our newer infrastructure would be reducing damages that should also reduce needed repairs. I do believe we are behind in funding for infrastructure, but I'm not convinced that the currently published numbers tell the whole story.

In March of 2006 Gov. Kempthorne's office brought the first GARVEE bill before the House asking for $998M total to be allowed authorized for the "Connecting Idaho" project. This was approved as was $200M bonding authority for 6 specific road projects (two of which were: $70M for I-84 from Caldwell to Meridian ,and $13.9M for resurface/widening of I-84 from Orchard to Isaacs Canyon). This bonding authority was approved above the standard $500M+ of the ITD annual Highway Account budget (bill H0854) for a total of over $700M for the remainder of 2006 and 2007 (GARVEE) bonding.

One year later (in March of 2007) when ITD brought the second GARVEE bill before the House, the full $200M of the initial "selling" of 2006 bonds had been completed. The state (out of the ITD annual 2006 State Highway Account) paid ~$700k in bond matching funds interest, while only obligating (spending) ~$51M of the $200M in the 12 months from the initial approval.

There were a number of questions as to why the remaining funds from the bonds had not been obligated and the summary conclusion was ITD was overwhelmed by the amount of money/work required for obligation of those funds. They then contracted with Washington Group International to "help them manage the projects and funds".


As of March of 07, legislative research found that the $51M that had been obligated was for "soft" goods like studies, planning and administration. Not a dollar had yet been spent on the ground, and there was still $149M in the "bank" that couldn't be spent for easement or other items because there just weren't enough "hands moving in unison" to make it happen.

With ITD still having $149M in hand that was not yet obligated to put roads on the ground (that interest was being paid on), there were some very hard questions being asked by the legislature of ITD and WGI; with regards to the rates being paid to WGI for "management assistance", when something "hard" was going to hit the dirt and what were the intentions with the remaining $149M that we were obligated to pay interest on.


In April of 2007, when the Legislature was being asked to authorize yet another $250M in bonding authority for the 2008 ITD budget, there were grave concerns with regards to having the ability to obligate, moderate and control such funds. Sighting the example of the first $200M that couldn't be spent to that date from the 2006 authority on transportation projects worried many Legislators. The 2007 bill (H336) asking for $250M more bonding authority was finally passed with many restrictions on just when the bonding could be completed and for what.

I truly believe that none of us in the House are of the mind that extra money doesn't need to be spent to upgrade our infrastructure, most of us are more concerned that we don't have an internal infrastructure in place to spend the kind of money that we have already thrown at the problems. This lack of ability costs us interest out of our annual Highway Account to pay on the bonds already authorized. Might we be able to spend this interest money better elsewhere in the system. It also costs us in having to "purchase" infrastructure to help obligate these funds.

As an example, the 2007 H0336 bill authorized to transfer up to $7M to pay the debt service (interest) on the GARVEE bonds issued thus far. As we increase our GARVEE bonding, we are obligating ourselves to pay more and more of the interest on these bonds from the future tax dollar revenues that we are dependant upon for our future transportation obligations and needs (again, our children's transportation infrastructure money).






Where do we go next...


Today I had the pleasure of joining Gov. Otter, ITD, local legislators and others involved in our GARVEE projects at the Isaacs Canyon overpass on I-84. The objective was to kick off the widening/resurfacing project that was authorized and signed by Gov Kempthorne in April of 2006... 17 months from the time of authorization to "kick off" of a $13.9M project that we are paying interest on... is just frustrating.


I received a letter today from our ITD District 3 Commissioner that another GARVEE bonding will be proposed to the Governor to include in his budget for the legislature in 2008 for $134M. This will include over $60M of additional funding needed for the Meridian 10 Mile Interchange project. I am not yet aware of what the remaining bonding will be requested for.


Currently the only way, I am aware of, for funding the remainder of the 10 Mile project is GARVEE. I've recommended to the ITD Commissioners and ITD a back-up plan...


We must get 10 Mile done next year for the safety of our citizens and economic growth of our city. In case the Governor or the Legislature decides we are "far enough out on this GARVEE limb" and doesn't approve the new bonding, we must have a backup plan for completion.


Your thoughts?