State feels bumps in the budget for roads

02/23/2006

Laurie Blake,
Star Tribune

One thing came up short while the state was delivering on Gov. Tim Pawlenty’s 2003 promises to speed up road projects: money.

After underestimating the cost of highway building and overestimating federal funding, the Minnesota Department of Transportation this year found itself $300 million short of what it needed to complete the next three years of metro road projects.

To keep the Crosstown Hwy. 62-Interstate Hwy. 35W reconstruction on schedule to start this spring, the agency has poached $50 million intended by Congress for local road, bike, transit and walking projects in the metro area. And it has gobbled the entire $100 million increase in federal highway money to pay for cost overruns of metro area projects, leaving none for outstate roads.

Now as the governor goes to bat for an ambitious plan to borrow $2.5 billion for roads over the next 10 years, transportation advocates and DFLers say MnDOT’s budget hole shows the folly of relying on borrowed money and Congress for the state’s pressing transportation needs.

“It’s now clear that Pawlenty oversold what he could do because federal funds he counted on didn’t come through,” said Margaret Donahoe, legislative director for the Minnesota Transportation Alliance.

The group says an increase in the gas tax would provide more reliable road funding.

Sen. Steve Murphy, DFL-Red Wing and chairman of the Senate Transportation Committee, said the budget deficit is a symptom of a risky transportation plan. “They were betting on the come, and they lost and now they are scrambling around robbing Peter to pay Paul.”

In the governor’s defense, Rep. Mary Liz Holberg, R-Lakeville, chairwoman of the House Transportation Finance Committee, said “any time we accelerate projects and get them done it’s a good thing.” Making road improvements sooner rather than later gives commuters more time to spend with their families and avoids higher future construction prices, Holberg said.

In the metro area, MnDOT’s budget pothole has local officials shaking their heads at the lack of road funding. Cities and counties are just as strapped for money as MnDOT is, said Dakota County Commissioner Paul Krause, who is a member of the Transportation Advisory Board (TAB) that loaned MnDOT the $50 million. “We need permanent transportation financing,” said Krause.

MnDOT’s use of the $50 million means five local projects designed to ease freeway congestion lost their funding. Among those delayed are the extensions of County Road 5 alongside I-35W in Burnsville and Lake Drive in Lino Lakes; widening of Hwy. 149 in Eagan; and upgrading Pierce Butler Route between St. Paul and Minneapolis to make it an alternative to crowded Interstate Hwy. 94. MnDOT promised to pay back by 2012 the $50 million that would have gone to these and other projects.

Bob McFarlin, assistant to the transportation commissioner, said in a letter to legislators that the governor is delivering on his promise to speed up road construction, unlike other states that have stopped projects due to the delay in federal funds. “Minnesota has done an excellent job managing through this crisis and keeping the highway improvement program largely on schedule,” he said.

But legislators of both parties are concerned about the cost overruns.

“I don’t think you ever want to have a shortfall whether it’s your personal budget or MnDOT’s budget ...” Holberg said. “We rely on professional staff to be more realistic about what the money will buy us.”

Fast-track projects

Promising that “relief is on the way,” Pawlenty in 2003 initiated an $800 million bond program that used $400 million in state highway bonds to attract $425 million in federal funding. He promised to start 19 projects years ahead of schedule.

MnDOT geared up to get the accelerated projects out for bids. Soon the projects were ready to start, but the money to pay for them was not.

The Pawlenty plan counted on federal funds from a new congressional transportation bill.

In November 2004, the state’s transportation commissioner, Lt. Gov. Carol Molnau, warned: “ The planning and construction of highway projects has become increasingly difficult given the absence of new federal funds and the unpredictability of future federal funding levels.”

Under short-term extensions, prior to passage of a new bill, Minnesota received $70 million less than MnDOT projected in 2004 and about $80 million less than projected in 2005.

At the same time, project costs were escalating due to cost increases for fuel, steel and concrete.

As a result, Molnau delayed start of work on the Interstate Hwys. 694/35E interchange in Little Canada by a year, and ultimately postponed the new interchange at Hwy. 169 and Interstate Hwy. 494 in Edina indefinitely.

In August 2005, 22 months after MnDOT expected it, the big federal transportation bill became law, amounting to a 46 percent increase over the previous bill.

Exactly what that meant was not clear until January when MnDOT announced it would receive $20 million per year less than it anticipated from the federal government through 2008, and the entire increase would go to cost overruns on metro projects.

“We decided long ago that it is better to keep the projects that we had planned on board and moving forward rather than cut a bunch of metro projects and start other projects elsewhere,” said Abigail McKenzie, director of MnDOT’s Office of Investment Management.

Outstate legislators were frustrated. “I’ve never seen highway projects take the political tenor that they’ve taken in the last three years,” said Rep. Al Juhnke, DFL-Willmar. “MnDOT says, ‘Well, guess what, folks, we are short of money… Don’t worry, rural Minnesota, you’ll never miss it’.”

Better cost estimates

The Federal Highway Administration has encouraged MnDOT to do a better job of estimating and controlling project costs. “If something starts to increase, whether cost or schedule on a highway project, we need to be prepared to explain why,” said Tom Sorel, the Minnesota division administrator for the federal agency.

MnDOT is taking steps to improve its project estimates and better control costs but not all costs are within the department’s control, said Tim Henkel, MnDOT director of program management.

“The reality is that as you move towards construction, you are racing to a finish line and trying to get final resolution with the communities,” Henkel said. “The end product is sometimes a cost increase, but there has to be a certain amount of flexibility provided so we do the right things and we fix the right things during construction and we get sound projects.”