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03/02/2011

ODOT director says highway construction program will be reduced

Dwindling gasoline tax receipts will force a reduction in Ohio's highway construction program, but proposals to raise funds from other sources aren't attracting much support during hearings now underway on the state's next two-year transportation budget bill.

In testimony before the House Finance & Appropriations Transportation Subcommittee last week, Ohio Department of Tranportation Director Jerry Wray said he planned to review proposed construction projects and advise local officials of the need to bring the program “back into balance.”

Wray's testimony kicked off legislative hearings on Governor John Kasich's proposed two-year, $7 billion transportation budget bill, House Bill 114, which is scheduled to take effect July 1.

“We’re going to be very frank with them and say, ‘Look, this project is not going. We don’t have the money to do it,' ” he said about discussions he will have with local officials who might believe that projects on the priority list of the Transportation Review Advisory Council are certain to be constructed.

Jennifer Townley, ODOT’s deputy director for planning, explained that the TRAC list of "Tier I," top-priority highway projects was overcommitted by $1.7 billion through 2017. The total projected costs for the TRAC’s Tier II projects, which are in the earlier stages of development, exceed available funding by $11 billion.

Wray said the administration will work over the coming months to downsize local expectations and might create another, lower-priority tier of TRAC projects. The TRAC project selection criteria might also be tightened, he said.

He said he wanted to bring predictability to the state's highway construction program, maintaining an annual spending level of $1.3 billion to $1.5 billion a year.

“We want to avoid peaks and valleys and give our stakeholders confidence they can hire workers and keep them on staff for the long-term, because the money and work will be there,” he said.

The state's highway construction program is under pressure because the primary revenue source that supports it, the state gasoline tax, has been stagnant for several years, even as construction costs have spiraled upward.

Nonetheless, some legislators have indicated they are willing to divert gas tax revenue away from highway construction in order to fund the operations of the State Highway Patrol, which is facing an estimated $57 million funding shortfall in the next biennium.

While the Kasich Administration is proposing a $10 increase in the vehicle title fee to fund the Patrol, subcommittee chair Rep. Ross McGregor (R-Springfield) said he and other committee members would consider other alternatives.

“Clearly the administration wants to find an adequate funding stream. But that being said, I think there are alternatives that need to be considered as well. That might not include the fee, or maybe not as big a fee as what has been proposed,” McGregor said.

Subcommittee member Rep. Cheryl Grossman (R-Grove City) said she had a “real concern” with the proposed title fee hike.  “We’re in very difficult economic times,” she said, adding the fee would “be another financial burden on people in Ohio.”

Rep. Alicia Reece (D-Cincinnati), the subcommittee’s ranking minority member, said while she was glad to see the elimination of the unpopular $20 late fee for drivers’ license renewals, she was concerned the proposed title fee increase would prove even more onerous.

Reece said she would be more comfortable earmarking gas tax revenue for the patrol.

Yesterday, Brad Cole, managing director of research for the County Commissioners Association of Ohio expressed a different concern with the proposed $10 title fee.

“CCAO is concerned that the bill would increase title fees, which are primarily a county revenue source, and then credit the increased title fee to fund a state agency,” he said in testimony. “CCAO is concerned that at a time of declining resources at the local level, the state is now proposing to use county collected fees to fund the Department of Public Safety.”

Currently either $11.50 or $12.25 of each $15 title fee is deposited into the Certificate of Title Administration Fund in the county treasury, he said. In most counties the fund covers clerk of courts’ processing costs and in some counties remaining revenue is deposited into the general fund.

“Due to the importance of maintaining local revenue sources for county purposes, CCAO is reluctant to have county collected fees used to fund state government operations,” he said.

Another ODOT proposals that would enable the department to build projects using public-private partnerships also generated a good deal of skepticism among members of the subcommittee, especially from the panel’s Democrats.

ODOT Chief of Staff Greg Murphy said the PPP provision could help the state finance major construction projects by getting an upfront investment in return for toll revenues that would generally flow to the private entity for several decades. “It leverages private dollars to expedite public transportation projects.”

Currently ODOT has no authority to enter into such agreements with private entities, he said. The proposal would allow the agency to consider major new projects, such as widening an interstate and adding a toll lane.

Murphy said tolling offers advantages for taxpayers because the private entity assumes all the financial risk if actual traffic falls short of projections. “They may get no dollars and they just spent $1 billion building a facility for the state of Ohio.”

James Barna, the department's assistant director of transportation policy, said PPPs would enable ODOT to build projects sooner, and thus avoid higher costs caused by inflation in construction costs.

Chester Jourdan, executive director of the Mid-Ohio Regional Planning Commission, asked that the PPP language be stripped from the bill and considered as a separate measure, so that local governments have the opportunity to voice their concerns.

Although PPPs have benefited the region and state through projects like the Rickenbacker Intermodal Yard and the Heartland Corridor, the language in the bill would allow agreements with no local input, even though local governments could become responsible for maintaining the resulting infrastructure, he said.

Rep. Peter Beck (R-Mason) questioned a proposal in the bill that allows ODOT to compensate teams that submit unsuccessful proposals on design/build projects. “Why should our taxpayers pay the burden for someone who submitted an unsuccessful bid?”

Barna defended the concept, explaining that engineering firms are required to perform a substantial amount of up-front work in the course of preparing a design/build project proposal.  Without the promise of compensation for that work, few engineers can assume the financial risk of participating in a design/build project.

Of the roughly $7 billion in spending proposed in HB 114, about $5.5 billion would go to fund ODOT's operations and construction programs, while $1.3 billion would fund the Ohio Department of Public Safety; $114 million to the Ohio Public Works Commission; and $38 million for special highway projects identified by the Ohio Department of Development.

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