Infrastructure/transportation funding was among the controversial issues at the state Capitol during the 2015 legislative session. With state revenues expected to trigger Taxpayer Bill of Rights (TABOR) spending caps (e.g. state income tax refunds) and Public-Private Partnership (P3s) in question, long-term solutions are yet to come.
Colorado’s economy is rapidly expanding and the state population is expected to grow from 5 million to nearly 8 million people by 2040. That means more pressure on an aging state infrastructure system already reaching capacity limits. At the same time we are experiencing robust growth – with an increased need to maintain and build roads, bridges and rail – infrastructure/transportation funding is under attack. Many are concerned the deteriorating and congested roads and highways will hamper Colorado’s economy and tourism.
In a May 7 Denver Business Journal article by Cathy Proctor, CDOT Director’s Assessment of Colorado’s Highway System: ‘Terrible’, the new executive director of the Colorado Department of Transportation, Shailen Bhatt, said that Colorado is in the midst of a transportation crisis with I-70 one of the biggest problems. He also noted that we need technology, in addition to construction, to address the crisis.
The Colorado Transportation Commission identified 50 major projects across the state, at a total cost of $2.3 billion. These projects must be addressed in order to adequately prepare for future population growth and foster economic development. The question is, how will we fund these essential projects? CAMPC is part of the ongoing discussions to find more permanent and alternate funding mechanisms so the state can not only maintain its existing infrastructure but also meet the future needs due to growth.
In 2009, CAMPC was part of an effort that resulted in the passage of Senate Bill 228, establishing a formula to fund capital construction and transportation with state general fund money. The projected amount of funding for FY15-16 was initially $205 million. It’s now projected that state revenues and spending caps will trigger TABOR refunds and will reduce the funding amount to potentially half, or $102 million. Current forecasts for the next two fiscal years would eliminate transportation funding entirely.
In April, Governor Hickenlooper proposed a five-point plan to the legislature to address the conflict with the TABOR cap and state spending needs. Part of the plan suggested converting the Hospital Provider Fee to a state fund so the revenues from this fee would not apply to the TABOR spending cap. The funds are earmarked for health care and cannot be used to pay rebates so the argument is if they can’t be part of the rebates they shouldn’t count toward the revenue limit that triggers the rebates. House Bill 1389 would have created the enterprise fund to free up more than $600 million dollars in the budget to fund other priorities like K-12 education, higher education and transportation. But, after passing the House, it died in the Senate.
Another viable, effective, and much needed funding source is Public Private Partnerships (P3s), where private sector money is invested in public sector projects and both the private party and public agency typically share in any resulting income. Phase 2 of the US 36 Express Lanes Project is an example of a successful P3 project, and CDOT’s first P3. This project became controversial as some questioned the use of a public private partnership, due to a lack of understanding of and misinformation about how P3s work. In March 2015, a State Auditor’s report was released determining that the Colorado Department of Transportation’s (CDOT) High Performance Efficiency Transportation Enterprise U.S. 36 Express Lanes project provided “the best value for taxpayers.” About two-thirds of the Phase 2 Project costs are funded through private sector investment, without which the project wouldn’t be completed for 20 years.
Competition for P3 resources is intensifying as infrastructure needs across the country are increasing and gas tax revenue, which typically funds infrastructure, is declining due to more efficient cars and no adjustment to the state gas tax since the 1990s. Yet, bills were introduced in 2014 and 2015 that would have limited the ability to implement P3s on projects in Colorado. Neither bill passed.
Bonding is yet another funding option. A bill to continue the authorization of existing bonds to fund $3.5 billion worth of highway and transit projects was opposed by the construction industry as not the right solution and ultimately died. So, following the 2015 legislative session we are left with a real crisis – an intensifying need for infrastructure and transportation solutions coupled with the reality of funding cuts. Highways will receive some funding thanks to SB228 which triggers $102 million in transfers to the Highway Users Trust Fund, again half of what was originally expected.
“Colorado is currently near the bottom nationwide in its investment in infrastructure,” said Colorado Contractors Association Executive Director Tony Milo. “We need to quickly get serious and be honest with the voters that an increase in funding is an absolute necessity to maintain our quality of life here in Colorado. We intend to engage elected leaders, the media and voters in a conversation this summer about how we can best raise the needed funds to make critical improvements to our transportation system statewide.”
The pressure is on the new CDOT chief, Shailen Bhatt, to assess the situation for local roads and more than 23,000 lane miles of highway and develop strategies that will take us into the future. The widening of Interstate 70 is one of the projects on Bhatt’s plate, which has been opened to a possible partnership with the private sector, showing a continued movement in the direction of P3s. In a Denver Post article by Monte Whaley, Bhatt is quoted as saying, “Using a mix of methods and relying on technology will be at the forefront.”
CAMPC will continue to take part in infrastructure funding discussions. An Investment in our roads and bridges which lead to our communities and buildings, ultimately leads to construction opportunities and economic growth. So, we will continue to support sensible transportation and infrastructure legislation and solutions for our contractors and the future of our state. Stay tuned for updates.