Every other year, the state legislature grapples with ODOT’s two-year budget. From mid-February to late-March is budget time, so OCA closely watches and comments on issues that arise during this process. This year was no exception, as we took advantage of the comment opportunity, just as we do every budget cycle, to publically address those topics contained in the draft language that we agree or disagree with, or just want to express an opinion on. Following is the testimony that was presented to the House and Senate. While this does not address every matter contained in the bill – and we are not given time to touch on every topic – it does highlight several issues that OCA wished to emphasize.
Two events during the past month have important ramifications for Ohio’s transportation infrastructure. First, the American Society of Civil Engineers published its much anticipated 2013 Report Card for America’s Infrastructure. Second, Governor Kasich signed Ohio’s $7.6 billion, 2-year transportation budget. Together these events set the stage for significant transportation improvements in Ohio.
The ASCE Report Card provides political leaders, policymakers, business leaders, infrastructure stakeholders, the media and the general public with expert advice from the civil engineering community about the condition of infrastructure across the nation. The 2013 Report Card gives America’s road system a grade of D, up slightly from D- in 2009. The positive change resulted from targeted efforts to improve road conditions along with significant reductions in highway fatalities. Similarly, the overall grade for bridges increased from C to C+, a change attributable to a downward trend in the number of structurally deficient bridges. America is moving in the right direction but has a long way to go to maintain the best transportation system in the world.
At the state level, the ASCE Report Card indicates that 42% of Ohio roads are still in poor or mediocre condition. Likewise, 9.1% of our bridges are structurally deficient and 15.9% are considered functionally obsolete. These Ohio statistics remain about the same as they were in 2009. But as of April 1, we have a new Ohio Transportation budget – and the opportunity to make significant road and bridge improvements over the next two years.
The Transportation budget authorizes the sale of $1.5 billion in new bonds leveraged against turnpike toll revenues. This will generate as much as $3 billion for road projects statewide. Specifically, the turnpike runs across northern Ohio for 241 miles. And the transportation budget requires that 90% of the money generated from the bond sale be spent on road projects within 75 miles of the turnpike path. That covers a lot of ground and provides funding for substantial improvements to Ohio roadways. The new budget – and the turnpike plan that is a key part of it – may not cover all the repair and restoration that our roads and bridges need. But it sure gives Ohio the opportunity to make some real infrastructure progress.
A review of infrastructure news over the past year makes two things very clear. First, everyone agrees that highways and bridges in Ohio and throughout the country desperately need repair, upgrade or replacement. Second, everyone understands that transportation infrastructure improvements come with a cost, but very few are willing to discuss raising the gas tax as a revenue strategy. In fact, a Google News search for July-December 2012 using the search terms “gas tax increase” and “raise the gas tax” generates few results – literally one or two. In comparison, the same keyword search for January 2013 to date produces many news stories from around the country.
Of course, 2012 was an election year and much of the post-election news focused on the anticipated fiscal cliff. But whatever the reason, gas tax discussions have been percolating in many states since the New Year began. Here is a sampling of recent newspaper articles and there are many more:
- From Iowa, 10-cent fuel tax increase for Iowa?
- From Maryland, Maryland should raise gas tax – Baltimore Sun
- From Minnesota, St. Croix bridge tolls, higher gas tax may be ahead | StarTribune.com
- From New Hampshire, House Committee Considers Gas Tax Increase | New Hampshire Public Radio
- From South Carolina, Proposal to raise gas tax would be linked to inflation | The
- From Washington, Lawmakers to propose 10-cent gas-tax hike for WA | Local News | The Seattle Times
- From Wyoming, Wyoming Legislature approves state fuel tax hike
Vigorous gas tax debate and new legislative proposals are increasing around the United States which brings us home to Ohio. We are a leader in creating innovative solutions for funding our transportation infrastructure. For the very first time, we have utilized a Public-Private Partnership (P3) approach to fund and build Cleveland’s second Inner Belt Bridge. And the Kasich Administration’s decision not to privatize the Ohio Turnpike will generate $1.5 billion in new state highway funds through bonds issued by the Ohio Turnpike Commission and supported by toll revenues. With matching federal and local funding, a total of $3 billion will be available for major highway construction projects in Ohio.
The P3 and Ohio Turnpike decisions are bold, innovative solutions for infrastructure improvement in our state. But it is also generally accepted that the best long term strategy for infrastructure funding will generate revenue from a combination of sources. While the current model of a fixed rate gas tax may be outdated, a modest rate increase with future adjustments indexed to inflation certainly merits consideration. As we look ahead and envision a superior network of Ohio highways and bridges for years to come, shouldn’t the gas tax be part of the discussion?
The proposed ODOT 2014-2015 transportation budget was submitted to the Ohio House of Representatives in early February. The following post is abridged from Mr. Runyan’s commentary in the January/February issue of Ohio Contractor magazine.
In what seems like no time at all, we have arrived at the point in time where the Kasich Administration will be submitting a proposed transportation budget for ODOT. In addition to the overall funding direction for the next two state fiscal years, there are a number of policy items that the Ohio Contractors Association already anticipates will be included in the bill that will be of interest to the heavy/highway community.
OCA has worked with ODOT for the inclusion of modifications in defining the amounts of performance and payment bonds. Presently, the amounts of these bonds are based on the state’s estimate amount. We have secured the concurrence of ODOT in supporting a change to set the bond amount equal to the contract price amount.
In an earlier edition of OC magazine, I wrote on the evolving contractual concept of Construction Manager/General Contractor (CM/GC). ODOT intends to include language in the budget bill to allow one pilot project to be administered, designed and constructed using this new project management and construction philosophy. This pilot project will be monitored closely to determine if there are, in fact, financial and operational benefits over the traditional design/bid/build methods.
Recommendations on the Ohio Turnpike operations study were recently announced. To the surprise of many, it was decided by the Kasich Administration to retain the current Turnpike Commission structure and permit turnpike toll revenue to secure bonding for projects that are not located on the turnpike. In their pre-announcement briefing, ODOT stated as much as $1.7 billion worth of projects can be directly financed with the use of these bonds. OCA will be supporting the administration’s effort to change current law so that turnpike-generated revenue may be expended for highway and bridge purposes off the current turnpike alignment.
OCA and ODOT have arrived at an agreement to fundamentally change how force account limits are measured on many projects that are performed by the ODOT workforce. In lieu of dollar limits, size limits will determine if the work can be performed by ODOT forces or must be contracted out for: bridge replacement, widening or deck replacement, culvert replacement or asphalt paving.
Recently, the Ohio Supreme Court ruled that revenues generated via the Commercial Activity Tax (CAT) on motor fuel must be spent for highway and bridge construction and maintenance purposes along with several other uses as stated in the Ohio Constitution. This ruling will require a change to the sections of Ohio law that define how CAT-generated revenue must be spent. Our hope – and efforts – will be to urge the legislature to direct those funds to road and bridge construction as prescribed by the constitution and affirmed by the Supreme Court.
These represent five major issues we plan on addressing in the upcoming legislation. No doubt other topics, offered by other sources, will arise. We will be evaluating each of these closely for their impact to the heavy/highway construction industry and responding accordingly.
A Look at 2013’s ‘Big Ticket’ Items
It is hard to believe that we are getting ready to turn the lights out on 2012. In the most recent edition of Ohio Contractor magazine, I took a look at a number of the accomplishments OCA has worked on in the recent past. However, nowhere does anyone get to rest on their laurels for very long. As we look toward 2013, there are many upcoming endeavors on which to focus our attention.
2013 will be stepping off with ODOT’s budget followed by Ohio’s general revenue fund budget. Each holds the potential of impacting the heavy/highway industry. In 2012, ODOT, under the leadership of Director Jerry Wray, has continued to push the envelope for operational efficiencies and funding alternatives. The recommendations for the future operations for the Ohio Turnpike will be announced this December, but the “how to” of implementing those recommendations will be playing out throughout 2013. Surely this will make for a lively debate centered on ODOT’s budget.
Other initiatives that were born in 2012 and will be carried into 2013 will include privatization initiatives, leveraging private funds for public projects, and the first-ever Construction Management/General Contractor (CM/GC) project.
In a nutshell, CM/GC brings the contractor, who is selected through a qualifications process, onboard early in a project’s development phase. The advantage is that the builder has input during the planning and design phases, thereby obtaining contractor input much earlier in the process. Once plan development has progressed to the point where construction costs can be established, ODOT would negotiate with the selected contractor for the final cost.
The big picture that must be kept in the forefront is that each innovation that is offered by ODOT presents the opportunity to shift operational funding into capital funding. This results in improved highways and bridges for the citizens ofOhioand more work for the heavy/highway community.