Detour – Funding Dip Ahead: MoDOT faces budget crisis

Amendment 3, passed in 2004, maxes out in fiscal 2009. The state must begin making payments in fiscal 2010 on the $2 billion in bonds secured as part of Amendment 3 to fund major road construction projects statewide. And revenue from state and federal fuel taxes is stagnant, while costs of materials, including fuel and asphalt, continue to rise.

The result: a state transportation department whose funding could drop by more than half in fiscal 2010, putting MoDOT in “maintenance-only mode.”

“Our revenue is flat while costs are going up, up, up,” said MoDOT spokesman Jeff Briggs. “Those things come together to paint a pretty bleak picture for us.”

At issue: Amendment 3

MoDOT’s problem begins with Amendment 3, which hits full funding levels this summer.

The amendment to the state constitution passed by Missouri voters in 2004 earmarked all sales tax revenue on new vehicles, as well as other vehicle user fees, for MoDOT.

Getting the money has happened gradually, Briggs said, with 25 percent of that money shifted from Missouri’s general revenue coffers in 2005, 50 percent in 2006, 75 percent in 2007, and 100 percent starting in July.

Briggs said once the change is fully in place this year, it will mean as much as $190 million to the department.

While $190 million may not seem like a windfall – the department’s annual budget is more than $2 billion – Amendment 3 also required MoDOT to issue bonds to speed up the timetable on numerous large projects, including the $25 million Interstate 44-U.S. Highway 65 interchange improvements completed last winter and the impending $60 million changes to the interchange of highways 60 and 65.

“We sold nearly $2 billion in bonds, and that has been a big driver for us in the last three and a half years,” Briggs said. “We targeted a bunch of high-dollar projects and either put them on our five-year plan or accelerated them and got them done in the last year or two.”

Funding is an issue because the state must begin repaying the bonds in July 2009, with repayment expected to last 15 to 20 years. Briggs said the bulk of Amendment 3 money will be used to repay the bonds, and because the state can’t take out new bonds to fund future projects until some of the existing bonds are paid off or new funding is identified, that leaves little money for new road improvements.

Stagnant revenues

The problem is compounded by slowing growth in state and federal fuel tax revenues.

Fuel tax is a level 17 cents per gallon, regardless of the total cost of fuel, according to Briggs.

Consumers facing record-high gas prices are responding by buying more fuel-efficient vehicles or reducing their driving, meaning a cutback in MoDOT’s fuel tax revenues. According to MoDOT’s 2007 Financial Snapshot, gasoline and diesel fuel consumption in Missouri grew only 3.4 percent between 2003 and 2007, and consumption dropped each of the last two years.

The budget is stretched even thinner by rising fuel costs for its own vehicles, higher construction equipment expenses and increased asphalt prices. The result is that major projects not yet on the department’s five-year plan could be put off further. The biggest such project, Briggs said, is needed improvements to interstates 44 and 70.

“We estimate that by fiscal year 2010 our annual construction budget will be about $569 million a year,” Briggs said. “That will mean basically enough money to take care of what’s out there, if we stretch it, but very little money to take on any new projects.”

The department’s construction budget this year is roughly $1.2 billion.

Possible solutions

While new or increased taxes – either on fuel, newly purchased vehicles or titles and licenses – have been proposed as a funding solution, legislators say they’re looking for funding sources that don’t require additional money from taxpayers.

One bill – Senate Joint Resolution 43, sponsored in the last General Assembly by Sen. John Loudon, R-St. Louis – offered a tax-free and fee-free option; the plan diverts 10 percent of general revenue growth to MoDOT.

The senator conducted a poll gauging support for the proposal in his legislative district and found more than 70 percent approved of the idea. The proposal could create an estimated $150 million in revenue a year for MoDOT by year four and $1.3 billion annually by year 20.

“ … We needed to get really creative with road funding ideas,” Loudon said. “I think people wanted to know that we’re doing everything we can with the money they’re already sending us.”

Loudon said he also supported legislation authorizing the state to create toll roads on new road construction.

“There are a lot of people sitting there with projects that are way down on the priority list, and you can tell them, ‘Which would you rather have? The road now with a toll on it, or the road for free but … just in time for you to retire?’” Loudon said.

Jim Anderson, vice chairman of the Missouri Highways and Transportation Commission, said while the commission doesn’t take a stance on legislative issues, he thinks some of the proposed solutions would be a hard sell to Missourians.

“It’d be very difficult to pass a fuel tax right now,” said Anderson, who also is the president of the Springfield Area Chamber of Commerce. “Using tolling as a revenue source, frankly, I think would be very difficult, too. From the research I’ve seen, people aren’t really excited about tolling. With the current economic climate, people aren’t anxious to do any type of taxing measures.”

The Missouri Transportation Development Council, a division of Associated Industries of Missouri aimed at improving the state’s transportation infrastructure, expressed frustration that the legislature didn’t take action in the recent session; the group had publicly supported Sen. Loudon’s proposal. Christen Jackson, lobbyist for MTD, said that while SJR 43 is a good idea, it’s a “first step.”

“There are a number of pieces to the puzzle – we don’t think there’s one magic bullet out there anymore,” Jackson said.

MTD, which has been in existence since 1972, is sponsoring a series of summits across the state to inform the community about MoDOT’s funding issue. The final summit of the series will be held Sept. 8 in Springfield. (See box below.)

Moving forward

Rep. Neal St. Onge, R-St. Louis, chairman of the House Transportation Committee, said the first step, before determining which direction to go for funding, is to figure out what is needed.

St. Onge said the committee has scheduled a transportation seminar June 11 at Capitol Plaza in Jefferson City. The meeting is open to the public so legislators can collect ideas and gauge public sentiment.

“ I think it’s going to be a couple of years before we can get anything done,” Anderson said.

Briggs said that MoDOT has no official stance on any of the proposed legislation, none of which even made it to a general vote in the last legislative session. Like AIM’s Jackson, Briggs and MoDOT are frustrated by the lack of legislative action on the funding issue.

“We’re talking about (funding) falling off a cliff here,” Briggs said. “We’ll be happy to do the best we can with any money we receive, regardless of what it is or where it comes from.”

Local Amendment 3 Projects

Interstate 44/U.S. Highway 65 interchange

The $25 million improvement project, completed in December, rebuilt the U.S. Highway 65 bridge over I-44 and created a northbound U.S. 65-to-westbound I-44 flyover ramp to alleviate traffic and safety issues at the cloverleaf intersection.

U.S. Highway 60/65 interchange

Construction is slated to begin in summer 2009 on improvements to the 30-year-old cloverleaf design. The $60 million project would convert two ramps to flyover ramps and place new bridge columns to allow for future lane additions.

U.S. Highway 65 capacity improvements

This $11 million project, slated to begin in 2011, would increase lane capacity on Highway 65 between Sunshine Street and Chestnut Expressway. The eventual plan is to make the highway six lanes through all of Springfield.

Gathering Public Input

June 11 in Jefferson City

The Missouri General Assembly’s Joint Committee on Transportation Oversight is holding a transportation summit June 11 at Capitol Plaza in Jefferson City. The meeting, which is open to the public, will allow legislators to hear ideas and gauge public sentiment on the transportation funding issue. Registration is available at www.house.mo.gov.

Sept. 8 in Springfield

Missouri Transportation and Development Council is sponsoring a separate series of summits across the state to inform the public about the MoDOT funding issue.

The third and final summit in the series is set for Sept. 8 at 10 a.m. in the Plaster Student Union auditorium on the campus of Missouri State University. MSU and the Springfield Area Chamber of Commerce will co-sponsor the event, which is scheduled to include chamber President Jim Anderson; Sen. Bill Stouffer, R-Napton, who sponsored legislation creating a 1-cent sales tax to fund highway improvements; and David Stokes of the Show-Me Institute, who plans to speak about public-private partnerships.

The event is free and open to the public, and no registration is required.

SBJ.net Poll

With funding in question beyond 2010, how should MoDOT obtain funds for new transportation projects?

Vote at sbj.net/poll.