The Transportation Funding Hole and the $4,000 Million CRC: Stop Digging

Evan Manvel

Over the past month, I've been reminded of some sobering truths. Our transportation revenue is evaporating. Our existing roads are falling apart. And these trends are accelerating.

The Oregon legislature must take immediate, serious action to ensure our transportation funding hole doesn't get even worse, while finding long term solutions.

Just how dire is future of transportation funding? The Economist laid out the federal picture:

Just as cars are growing more fuel efficient, Americans are driving less. While better fuel-efficiency is good news for Americans’ wallets and less driving good for the country’s air, for its highways and mass-transit systems, it is something of a disaster.

Monies paid into the Highway Trust Fund fell by around one-seventh from 2007 to 2010. Earlier this year the Congressional Budget Office forecast that the Highway Trust Fund will be unable to fund highway maintenance by 2013. That money will be difficult to find elsewhere.

Obama and his transportation secretary Ray La Hood oppose raising the gas tax; a tax on miles travelled is probably a political impossibility...

Here in Oregon, the situation is just as serious. ODOT Director Matt Garrett recently wrote an explosive, underreported memo to the House Transportation Committee. Key excerpts:

… half a billion dollars of expected [gas tax] revenues over [the 2008-2015] period evaporated … [A]gency operations costs have grown faster than revenue, largely because of higher health care and PERS costs [growing 8% a biennium]. Agency expenses are now higher than the State Highway Fund resources available to pay for them.

… resources are now essentially fully committed to debt service, the costs of running the agency, and maintaining highways, leaving virtually no state funding for new capital projects...

… If Congress does not find additional resources, highway program funding will have to be cut by about one third, and transit program funding will have to be cut by about 40 percent. Oregon’s annual federal highway program funding [would fall] $150-175 million… forcing projects already [scheduled for construction] to be eliminated or delayed.

… Lest you think things will get better in the future when the economy recovers, consider the future of the transportation system’s main funding source: the gas tax. The gas tax provides about 45 percent of the State Highway Fund’s ongoing revenues... Fuel efficiency of new cars has increased by 16 percent since 2004... Fuel efficiency [is] scheduled to rise to 54.5 mpg by 2025, at which point the gas tax will no longer be a viable funding source.

Costs are up. Revenue is down and falling precipitously. And maintaining what we’ve already built? ODOT says Oregon is $1.3 billion a year short of revenue to maintain steady-state, and there's a bubble in the future:

In the 2030s and 2040s, ODOT will need $5-6 billion per decade to deal with this wave of [bridge] replacements and repairs — about 10 times the amount currently being invested.

To sustain [our road] conditions in the long run would require paving 780 lane miles each year... [ODOT is currently] paving just 355 miles per year... it costs eight- to 12-times as much to reconstruct pavement in poor condition as it does to do preventive maintenance or minor rehabilitation on pavement while it is still in good condition.

In oral testimony, Garrett notes we’ve already maxed out our borrowing and are highly leveraged:

“Looking at some policy decisions that were made in the early 2000s, to move from a very conservative pay as you go organization to one one that bonds ... and leverages additional revenue through bonding ... I will have $210 million tied up in debt service, that’s about 25% of the ODOT budget ... I have tied it up for 25 to 30 years. The credit card bill will continue to come due.”

Director Garrett put a fine point on it: “this is just a fiscal reality. And it demands we pivot.”

“It is prudent to align [our expenses] with our revenues. And I think we should take advantage of it right now, rather than waiting and hoping that maybe there is an infusion of money from the state, or maybe there is an infusion of money that comes from the federal government. I can’t take that chance, to be very honest with you. I think it’s prudent to make some business decisions to align to that reality we see as we look to the horizon."

As the saying goes -- when in a hole, stop digging.

During the 2012 session, the legislature should take action and stop ODOT from dumping tens of millions of dollars into the costly, risky Columbia River Crossing, the most expensive transportation project in the region's history. Paying high-priced CRC consultants drains precious funds from critical maintenance needs across Oregon. And the $4,000+ million in costs to come will create what Ross Perot might call a "giant sucking sound."

The need to find a long-term fix for transportation funding is clear. The solutions are not. In the short term, the legislature must step up to their fiscal duties and intervene before we put even more debt onto the backs of our grandchildren.

It may be a hard decision, but it's the responsible one.

By Evan Manvel Dec. 16, 2011