States Slow Highway Projects as US Funding Crisis Looms

This story appears in the June 23 print edition of Transport Topics.

State transportation officials said they are pulling construction projects from monthly bidding advertisements and drawing up contingency plans in case there’s a shut-off of federal highway money this summer.

The Highway Trust Fund is expected to be insolvent in August, which means that unless Congress comes up with a cash infusion, the government can’t send reimbursement checks to the states for highway work already under way.

“At least 6,000 projects may stop in their tracks,” said Tony Dorsey, spokesman for the American Association of State Highway and Transportation Officials, which has been tracking the effect that a trust fund collapse this summer would have on state highway projects.

“It would put us in critical state,” said Brent Walker, summing up the effect on West Virginia, where he’s Department of Transportation spokesman.

“We’d look to halt all of our active construction contracts,” Walker said. “We would immediately halt advertising new construction contracts and those would include our preservation-type projects like bridge replacements, our paving program.”

U.S. Transportation Secretary Anthony Foxx has said that a long-term crisis in the trust fund could imperil nearly 700,000 jobs.

Fearing a lapse in federal reimbursements, some states have already slowed highway work.

Arkansas in April pulled 10 projects worth $60 million off its ready-to-bid list, including three bridge replacements.

Kentucky has delayed $160 million in construction projects, plus $35 million in pavement rehabilitation.

“We had planned to put them out to bid in May, but they got pulled back because of the uncertainty,” said Chuck Wolfe, spokesman for the Kentucky Transportation Cabinet.

New Hampshire has put disclaimers on its construction advertisements warning contractors that the trust fund crisis could cause a work stoppage.

The state earlier this month delayed advertising $5 million in small projects in order to save some of its federal allotment to continue projects currently under way if the collapse happens in August.

That strategy is not without risk, however, because under federal law, allotments must be spent within a certain time or they can be redistributed to other states, said Patrick McKenna, the state’s deputy transportation commissioner.

“It’s a no-win situation for every state, and regardless of the path we take . . . and we’re only going to know after the fact whether we took the right path,” McKenna said.

Like AASHTO, the American Road and Transportation Builders Association has been tracking the anxiety building in the states.

ARTBA found that in the first four months of 2014, contracts for state and local government transportation projects were down — standing at $19 billion compared with $21.2 billion in the same period last year.

In addition, 27 states awarded fewer contracts for highway and bridge work this April than in April 2013, ARTBA said.

On average, federal funds account for 52% of what states spend on highways and bridges, and every $1 billion invested in highways supports 27,823 jobs, ARTBA said.

In some parts of the country, the timing of the impending crisis ramps up the anxiety.

“This is our construction season, so these guys are going gangbusters right now,” said Delaware Secretary of Transportation Shailen Bhatt.

Bhatt also said that early this year he got a $50 million line of credit from the banks intending to use it to help his department better manage cash flow.

“I never thought that it would be to float payments for missing federal funds, but if that is the case, then, that is what we’ll do,” he said.

Some states are holding their breath and proceeding with all of their projects in hopes they can outlast a disruption in reimbursements.

“For this summer construction season, specifically, all projects are currently proceeding as scheduled and planned,” said Meg Ragonese, spokeswoman for the Nevada Department of Transportation.

If the federal checks do slow or stop, Nevada will pay project invoices with its own highway money, though doing that “would severely limit our ability to program and fund the future transportation projects,” she said.

Missouri said it also believes it can weather a short crisis this summer if Congress dallies over fixing the trust fund. “If it goes on for several months, the department will have to consider delaying projects,” said Missouri Transportation Department spokeswoman Holly Dentner.

Oregon officials said they, too, believe they have enough of a cushion to keep projects going.

“We could probably last for six to eight weeks for sure; we have not really run scenarios beyond that point,” said Travis Brouwer, ODOT chief of staff.

“They absolutely need to take care of this before they leave in August or they will leave some states high and dry,” Brouwer added.

However, the immediate funding crisis is only one of two facing the trust fund and, hence, the states.

The second crisis could hit Sept. 30, when the trust fund’s authorizing legislation, MAP-21, expires. Without an extension or a new law, reimbursements will lapse.

Anticipating that possibility, Missouri, which usually adds 300 to 500 projects to its long-range state-federal funding plan each year, added only 25 this year, the state DOT said.