Continuing uncertainty over the future of the Federal Highway Trust Fund has forced state highway officials to suspend 56 construction projects totaling an estimated $112 million from its April bid letting.
The move marks the third time this year the Arkansas Highway and Transportation Department has withdrawn projects from bid letting, amounting to 61 projects worth an estimated $162 million.
The latest suspension includes 50 projects that are part of the department's $50 million overlay program, which is a series of interim maintenance projects designed to lengthen the life of existing highways. Much of those projects would have helped roads damaged by the most recent rounds of winter weather, state highway officials said.
Among the non-overlay projects suspended is the second phase of improvements to the Interstate 30/Interstate 430 interchange in Pulaski County.
Scott Bennett, the agency director, said suspending the overlay program will have an adverse economic impact on the state.
"Now that we have cancelled our overlay program for this year, there are few areas in the state that are not affected by projects withdrawn from the April bid letting," Bennett said in a statement. "If you stop and think about the economic impact this has -- not only on construction jobs, but the lost commerce that results in each local area because construction isn't taking place -- then you begin to understand the trickle-down effect and the urgency of solving this national problem."
The Highway Department has moved now to head off the potential problem of paying for work on existing projects should Congress not act before funding for the trust fund expires May 31.
Since December, the department said, it has been evaluating its schedule of federally funded projects before each bid letting to make sure sufficient state money is available to fulfill its commitments if there are reductions or delays in federal reimbursements.
"When you pay all your bills with state money and then your federal reimbursements are delayed or reduced, you have to be proactive," said Randy Ort, the department's assistant chief for administration.
Highway construction projects in Arkansas are initially paid with state funds, and then the state seeks reimbursement from the trust fund for the federal portion of those payments, department officials said.
Don Weaver, the owner of Weaver-Bailey Construction Co. of El Paso and chairman of TRIP, a national transportation advocacy organization, said the department's decision will be felt by highway contractors, noting that the next letting isn't until June.
Stripping the 56 projects from the April letting leaves about 32 projects worth an estimated $23.75 million. Six are regular federal-aid construction projects. The others are state-aid county and city projects, which are smaller than regular state projects.
"You're losing about half of the summer contracting season," Weaver said Wednesday. "I'm sure it will lead to layoffs. We've got jobs, but I'm sure others need to work."
Contractors, because they bid competitively on work, never know from one year to the next whether they will have work. Weaver said it is doubly troublesome when they have little work on which to bid.
"We're just like farmers," he said. "We just hope the Lord provides -- and the Highway Department."
Arkansas isn't alone in dealing with the trust fund uncertainty. It is one of four states -- the others are Georgia, Tennessee and Wyoming -- that have canceled or delayed $780 million in transportation improvement projects, according to the American Road and Transportation Builders Association.
Another nine states say more than $1.8 billion in projects are at risk, the organization said. It notes that the trust fund provides, on average, about 52 percent of funding annually for state road and bridge projects.
"This is one of the most easily avoidable crises because Congress has known the May deadline was coming for about eight months," Pete Ruane, the association's president and chief executive officer, said in a statement. "Yet, here we are again flirting with another economic meltdown in the peak of the construction season."
U.S. Sen. John Boozman, R-Ark., acknowledged the frustration state highway officials face and the prudence they must use ahead of the May 31 deadline. But he said Congress is certain to reach an agreement on the trust fund ahead of the deadline, likening its members to college students who often work on term papers only just before they are due.
"It's going to happen," he said. "We seem to brush up against these deadlines. It's not helpful."
The holdup is the source of the new money for the trust fund, which until recently has relied on revenue generated by road users. The traditional source is federal fuel taxes, but they have been flat for several years thanks to more fuel-efficient vehicles.
Congress has been reluctant to increase fuel taxes, which haven't been raised since 1993. As a result, since 2008, Congress has had to inject other revenue into the fund to keep pace with what the trust fund is authorized to spend.
Among the latest ideas to bolster the trust fund that Boozman cited is to offer a one-time repatriation tax to allow U.S. companies to voluntarily repatriate their overseas earnings at a rate well below the existing 35 percent U.S. corporate tax rate, with the proceeds transferred to the trust fund. U.S. companies have parked about $2 trillion in foreign earnings overseas partly to avoid paying the going rate.
Another is to expand drilling for fossil fuels on federal lands and in offshore areas and steer the resulting royalty revenue into the trust fund.
"We're trying to come up with a funding mechanism," Boozman said. "Everybody is working very hard at getting this done."
A likely scenario will have Congress enact a temporary stopgap measure, called a continuing resolution, which will provide funding at existing levels while a longer-term fix, preferably at least five years, is worked out.
"I'm committed to getting a five- or six-year bill," Boozman said. "At the very least we need a bill."
Should Congress find a fix, most of the projects the department has shelved likely will go to bid as they can be fit into the agency's schedule, said Ort, the Highway Department official.
The projects have to be scheduled based on the department's cash-flow position, as well as the amount of work the contractors can take on, he said.
"There will not be a special bid letting, no," Ort said. "We would space them out as we are able to."
But the department's annual overlay program likely will go unfunded this year no matter what Congress does, given the stresses on the agency's budget, he said. Those include the loss of $20 million annually from shifting 1 cent of the state fuel taxes to city projects and $18 million shifted from construction to maintenance and equipment purchase, in part to better handle winter weather.
Metro on 03/25/2015