1 commission to study future sustainable revenue sources for funding improvements to state and...
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Commission to Study Future Sustainable Revenue Sources for Funding Improvements
to State and Municipal Highways and Bridges
HB 2, Chapter 144:291, I, Laws of 2009
November 1, 2010
Final Report
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Commission Charge
• HB 2, Chapter 144:291, I, Laws of 2009 established a commission to study future sustainable revenue sources for funding improvements to state and municipal highways and bridges.
• The Commission met 18 times.
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Membership
The Commission was made up of members appointed by the Governor, Senate President, House Speaker, representatives of the Department of Transportation and Department of Safety, and the chairperson of the Governor’s Advisory Commission on Intermodal Transportation.
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Membership (continued)
House Senate Governor Rep. Candace Bouchard Sen. Lou D'Allesandro Kate Peters Rep. W. Douglas Scamman Sen. Harold Janeway Alice Chamberlin Rep. David Campbell Sen. Robert Letourneau Department of Transportation Department of Safety Commissioner George Campbell, Jr, Assistant Commissioner Earl Sweeney
Governor’s Commission on Intermodal Transportation Executive Councilor Raymond Burton, Chair
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Past Legislative Efforts
The Commission is the latest in a long line of recent highway funding study committees/commissions.
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Information Gathered
• The Commission collected information and consulted with a variety of sources, including the New Hampshire Department of Transportation, New Hampshire Department of Safety, State Treasurer, Legislative Budget Assistant, Federal Highway Administration, TRIP (A Washington, DC based national transportation organization), JP Morgan, the Council of State Governments, American Association of State Highway and Transportation Officials (AASHTO), U.S. Energy Information Administration, New Hampshire Motor Transport Association, Brookings Institute, Associated General Contractors of New Hampshire and AGC of America.
• Best case scenarios and detailed financial projections, other states’ experiences, and federal highway funding prospects were all analyzed at length.
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Focus on Sustainable
The Commission attempted to limit its work on sustainable and equitable sources of funding while recognizing the reality of what options are truly viable. Sustainable sources include the traditional forms of funding infrastructure needs, such as bonding, tolling, gas tax (motor vehicle road tolls) and motor vehicle registration fees. Unless long-term sustainable revenues match defined infrastructure needs at levels that are recognized as necessary these infrastructure needs will go unmet and be deferred to more costly improvements.
As a small piece of the overall puzzle, the current decline in gas consumption will continue to create a gap that is not sustainable for funding projected needs.
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Highway Fund: Sources of Funding FY10-11
Estimated revenue projected to be available to NHDOT & NHDOS and Betterment Fund for operating and capital construction costs for FY11 is $376M
$127M from gas tax (15 cents of 18 cent total) $ 99M from vehicle registration fees $ 45M from registration surcharge $ 9M from vehicle violation fines (to NHDOT) $ 22M from federal aid indirect costs $ 20M of Turnpike funds for the I-95 sale $ 12M from federal aid retroactive Turnpike toll credits $ 2M from the sale of surplus property $ 25M from gas tax for Betterment Fund (3 cents of 18 cent total) $ 15M from registration surcharge for Betterment Fund
Footnote: Revenue made available in 2010 was $365M Toll revenues are not part of the Highway Fund
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Stimulus Funds• In 2009 the DOT received approximately $129.4M in federal
stimulus funds (ARRA), which was a one-time payment of additional funds. The Department used the funds for paving, a section of the I-93 widening project, the Manchester Airport Access Road, and work on several bridges and transportation enhancement projects. The funds enabled the Department to catch up on its paving schedule, which had been reduced due to a lack of funds.
• It is important to maintain an adequate paving schedule in order to prevent more costly repairs over time. While the Department should pave at least 500 miles per year, the paving program had been reduced to an average of 250 miles per year due to a lack of revenue. In 2009, the Department was able to pave 750 miles of roads per year. Without additional revenues in the next biennium, the paving schedule will return to 250 miles per year.
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Commission’s Task: Analyze Funding Problem and Shortfalls for New Hampshire Highways & Bridges
• Revenues are needed for the DOT and DOS to carry out their missions. The Highway Fund is lacking $124M in the next biennium and will have a $1.2B operating and capital shortfall by 2020.
• Additional revenues are needed to fund the combined operational and capital deficit of the State’s highway and bridge system.
• The 2011-2020 Ten Year Transportation Plan is under funded by $1.2 billion.
The economic vitality and growth of our state along with the safety of our citizens will be in jeopardy if
the funding shortfall is not reversed.
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Highway Trust Fund
• The Highway Trust Fund revenue is critical to both the Department of Transportation and The Department of Safety’s budget. Part II, Article 6-A of the New Hampshire Constitution requires all New Hampshire Highway Trust Fund revenue to be used for roads, with the exception being for traffic supervision and the cost of collection of registration fees and operators license fees, all responsibilities of the Department of Safety.
• The revenue includes the Road Toll (gas tax), registration fees, and operators’ license fees. By law, RSA 9:9-b currently restricts the Department of Safety to not more than 30% of the total Highway Fund.
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State Highway System
• New Hampshire’s highway and bridge system contains over 4,000 miles of State maintained highway, and 2,129 state bridges.
• Included in the state bridge total are 142 red listed bridges, meaning bridges in need of repair and/or replacement.
• There are another 250 bridges, which are referred to as pink listed bridges, that will soon be red listed bridges if maintenance and/or repair problems are not addressed soon.
• Nearly 15% of the state bridges are in need of maintenance and/or repair based on their being on the red list (state and local).
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Standard Budgeting and Reporting
Because both the Department of Safety and the Department of Transportation budgets rely on the Highway Trust Fund, the Commission established a sub- committee that created a single standard for budget reporting and forecasting revenue for both departments. This created transparency and fairness between the two department budgets.
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Highway Fund:State Road Toll (Gas Tax)
• Currently at 18 cents per gallon for gasoline and diesel fuel. New Hampshire has the lowest rate in the northeast region.
• The State gas tax was last raised in 1992, when the price of unleaded regular gas nationally was $1.13, less than half the current level.
• Each penny of the road toll provides the Highway Fund approximately $8.3M, of which $7.3M is used by the State and 12% or approximately $1M is used by municipalities.
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Highway Fund: State Road Toll (Gas Tax) (continued) Proceeds are deposited to the Highway Fund, but must be used first
to pay debt service on bonds or notes on General Obligation bonds.
The State allocates the Road Toll (18 cent gas tax) in the following programs:
• 12% is allocated as Block Grant Aid to cities and towns.• 3 cents (less 12%) is allocated to the State Betterment Fund. • 15 cents (less 12%) is for the Highway Trust Fund. • From the Highway Trust Fund, $8.5M per year is made available to
cities and towns through two programs:– State Aid Bridge (SAB) $6.8M State with $1.7M (20%) local
match.– State Aid Highway (SAH) $1.7M state with $0.85M (1/3) local
match.
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Highway Fund: State Road Toll (Gas Tax) (continued)
Pros: • Fairness.• Infrastructure in place for low-
cost collection.• Paid by residents and non-
residents.• Revenue shared with
municipalities.• Not a new tax or fee.• Current tax lower than
neighboring states.• Revenue dedicated to
highways and safety.• Could be done incrementally.
Cons: • Moderately regressive impact.• Does not address long term
challenge from higher MPG and alternative fuel vehicles.
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Highway Fund:State Road Toll (Gas Tax)-Option
Pros:• Indexing is based on inflation
and or fuel consumption and adjusted at regular intervals.
• Indexing allows revenues to more closely align with costs.
• Rate changes can be automatic without legislative approval within a predetermined cap.
Cons• No direct correlation between
funding available and needs to be addressed.
OPTION: INDEXING THE GASOLINE TAX TO PRICE
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EXHIBIT 5
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EXHIBIT 6
NH is 9.4% below the MA gas tax and 8.2% below the MA diesel tax.
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Highway Fund:Motor Vehicle Registration Fees
Fees for passenger cars are as follows:
0-3000 lbs. 3001-5000 lbs. 5001-8000 lbs. Registration Fees Pre-7/01/09 $31.20 $43.20 $ 55.20 7/01/09-6/30/11 $61.20 $73.20 $100.20
Note: The table represents state fees. Local fees are based on the age and the original list value of the vehicle. (For instance, a 3 year old, $20,000 vehicle has a local fee of $180.00.)
An increase of $1.00 raises an additional $1.5 million dollars.
Vehicle Registration Surcharge raises $41M in FY10 and $45M in FY11.
The surcharge sunsets June 30, 2011, leaving an $86M shortfall in the next biennium.
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Highway Fund: Motor Vehicle Registration Fees (continued)
Pros: • All registered vehicles pay.• Captures non-gasoline fueled
vehicles to pay for their use of roads.
• Collection infrastructure in place. There is no additional collection cost associated with the surcharge.
• NH only collects registration fees on vehicles. Other New England states collect registration fees plus high sales tax fees when vehicles are purchased.
Cons:• Only paid by NH residents.• Not based on vehicle miles
traveled or use of (damage to) highways; it is assessed per vehicle.
• Weight-related fees are diminishing with the trend toward smaller, lighter vehicles.
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Highway Fund: Motor Vehicle Registration Fee Surcharge
The motor vehicle registration fee increase established in HB 2, Chapter 144, Laws of 2009, was a temporary, two year measure, which sunsets on June 30, 2011.
The temporary fee surcharge will raise approximately $86 million dollars in total, and significantly, about $10 million dollars in increased municipal Block Grant Aid (this is the only area where overall aid to cities and towns actually increased).
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What the Loss of the Fee Surcharge Means to the Transportation System
The surcharge allows the capital construction program to move forward, and covers operating costs for servicing the highway system. The State’s Betterment Program realizes a $15M increase to expand the paving program and accomplish more bridge work. Without some replacement revenue after June 30, 2011, DOT will be forced to drastically change its mission and the State will fall behind again in basic road, bridge and winter maintenance.
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What the Loss of the Fee Surcharge Means to DOS
The Department of Safety’s portion of the registration surcharge loss that will need to be made up by budget cuts would be approximately $6,480,000. Cuts of this magnitude could cripple both citizen service and the safety of our citizens.
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Highway Fund:General Obligation Bonds
Pros:• Project can be done
sooner.• Minimizes construction
inflation increases.• No fees, taxes or tolls are
directly raised.
Cons:• Debt service burden
ultimately reduces capital for future projects.
• The State’s AA rating would be negatively impacted by issuance of a significant number of additional bonds without additional revenue.
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Highway Fund: GARVEE Bonds
GARVEE Bonds (Grant Anticipation Revenue Vehicles) support the FHWA program by which states can borrow (bond) revenue, which in turn is paid off with a priority claim against future federal highway revenue.
Pros:
•Project can be done sooner.
•Minimizes inflation increases.
•No fees, taxes or tolls are directly raised.
•No pledge of any other state funds besides federal highway funds received by the State.
Cons:
•GARVEE bonds limit the amount of federal funding available for future projects.
•Not sustainable.
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Highway Fund: GARVEE Bonds Legislation
• The NH Legislature (RSA 228-A:2) approved the use of GARVEE bonds for the I-93 widening ($195M total).
• In November 2010, the Treasurer will issue $80 million in GARVEE Bonds for I-93 and another $115 million planned to be issued in Fall of 2011.
• Bonds have a 15-year maturity limit.• While GARVEE bonds are a claim against future federal funds, it is
important to note the legislative intent as stated in the 2004 Majority Report findings:
“ Lastly, the Commission finds that the associated costs of bonding the incremental dollars for an accelerated time frame can be offset by the sale of surplus real estate purchased within communities along Interstate 93 from Salem to Manchester.” (Final Report, SB 413, Chapter 220:1, Laws of 2004, page 2)
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Highway Fund: GARVEE Bonds Legislation (continued)
The State Legislature also authorized an additional $45 million in GARVEE bonds to finance replacement and or repairs to the Memorial and the Sarah Mildred Long Bridges in Portsmouth. Match to be paid from the State Aid Bridge Fund or Betterment Fund.
(RSA 240, The Ten Year Transportation Plan, HB 2010, Chapter 231:5, Laws of 2010)
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Highway Fund: GARVEE Bonds - Limits
• The maximum amount of GARVEE Bonds a state issues in any one year should result in debt service (principal and interest) being less than 33% of the state’s yearly allotment of federal funds, or in New Hampshire’s case, less than $50M ($155 x 33%).
• The Department has set an upper limit for itself of $24M/year for the I-93 project.
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Highway Fund: GARVEE Bonds-Option
Pros • Uses either a fee, such as a
dedicated gas tax increase or State credit, to offset the interest allowing for reasonable debt service rates.
• Annual available federal funds can support more debt.
• Project can be completed at an earlier date.
• Minimizes construction inflation increases.
Cons• Requires an increase in state
revenue or pledging other state security.
OPTION: INDIRECT GARVEE
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The Turnpike System
• The Turnpike System consists of 89 miles of highway and 164 bridges.
• The Turnpike System is funded from the tolls paid by the users and not the Highway Fund Road Toll (gas tax) and registration fees.
• The authority for increasing tolls is with the Executive Council while the authority for setting toll discount rates is with the Legislature.
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Turnpike: Tolls
Pros:
• User-fee.
• Imports out-of-state revenue.
• New technology/convenience Open Road Tolling.
• Increases linked to needs.
• Increasing rates do not require additional collection expenses.
Cons: • Results in some traffic being
diverted onto other roads.• Residents near tolls feel they pay
more for roads due to paying gas tax and tolls.
• Unlike gas tax, no revenue sharing with municipalities.
• Collection and administrative costs are relatively high.
•Tolls are utilized to fund the NH Turnpike System. • In 2010 tolls raised approximately $116M.
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Turnpike: Tolls-Option
Federal Interstate Tolling Pilot Program for I-93:
• Participation in the federal Interstate System Reconstruction & Rehabilitation Pilot Program would authorize New Hampshire to toll I-93 in order to finance completion of the I-93 widening project and enable the Department to complete the project at an earlier date.
• The NHDOT financial plan for FHWA proposes the project be completed by 2020, but without additional funding the completion date is likely extended to 2030 or later.
OPTION: I-93 TOLL DEMONSTRATION
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Turnpike: Tolls-Option (continued)
Pros• Revenue will fill the gap needed to
fund expanding I-93 to 4 lanes.• Revenue will fund maintaining the
Salem-Manchester I-93 corridor.• Tolls appear to be more popular with
the public than gas taxes for now, but that popularity may be tested with continued and/or frequent increases and/or expansion in the coming years.
• True user fee.• Frees up revenue for the rest of the
Ten Year Plan.• Tolls to be removed when project is
completed.
Cons:• Federal regulation only allows funds to
be used on I-93 in the southern corridor.
• Toll collecting infrastructure not in place.
• No cash transactions.• Politically unpopular.• Residents near tolls feel they pay more
for roads due to paying gas tax and tolls.
• Unlike gas tax, no revenue sharing with municipalities.
• Enabling legislation needed• New fee.• Tolls to be removed when project is
completed.
OPTION: I-93 TOLL DEMONSTRATION
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Turnpike: Toll Credits• Turnpike Toll Credits are a mechanism by which the State’s match
for Federal Highway Administration (FHWA) funds can be reduced in recognition of the State’s capital investment into its highway system using non-federal (toll) revenue.
• Non-federal capital dollars invested into portions of the state highway system that supports interstate commerce can become in effect a credit that reduces the amount of hard match monies the State needs to provide in order to obtain federal highway funding.
• As a result, New Hampshire Highway Fund dollars that would otherwise be needed for matching federal funds can be used to address other expenses incurred by the NHDOT.
• On the flip side, the amount of funding available to support federal aid projects is reduced by the value of the credit, and in essence the amount of federal aid construction work for that year is reduced.
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Turnpike: Revenue from Sale of 1.6 miles of I-95 to Turnpikes
• The Highway Fund received $30M in FY2010 and $20M in FY2011 as part of the agreed transfer of 1.6 miles of I-95 to the Bureau of Turnpikes for a total of $120M.
• Subsequent payments are scheduled at $5.9M per year, until July 2029, or $12M in the next biennium.
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Other OPTIONSConsolidation
• Consolidation of portions of the interstate system with the Turnpike System is not an asset transfer, but rather combines the systems, which will enable the Department to treat portions of the interstates and limited access facilities as related facilities, eligible for surplus Turnpike funds. Interstate maintenance and operation work would not be performed by Turnpike staff, but the cost of maintenance and operation for the related facilities would be paid from the Turnpike surplus after all other Turnpike needs are met.
• Consolidation differs from an actual asset transfer, which could negatively impact the bond debt service coverage ratios. Utilizing the transfer from Turnpike surplus funds to the Highway Fund, instead of an obligation under Turnpike operating expenses, maintains those ratios to the benefit of the Turnpike System.
• Consolidation may or may not require a toll increase.
• Unlike aggregation of the entire Interstate System into the Turnpike System, consolidation would look at closely related interstate sections, such as the section of I-93 South from the state line to 293 in Hooksett or NH Route 101 from Hampton to Manchester.
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Other OPTIONSConsolidation (continued)
Cons:• Diverts previous Highway
Fund cost to the turnpike system and turnpike users.
• Politically unpopular.
• Requires enabling legislation.
Pros:• Diverts previous Highway
Fund cost to the turnpike system and turnpike users.
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Other OPTIONS
Public Private Partnerships (P 3’s)
Pros• Provides cash from the long-term
lease of an asset. Example leasing I-95.
• Enables new projects to be constructed that can’t go forward due to lack of funding.
Cons• Financing tool with cost and risk• Trading future revenue for
immediate revenue.• Frequent toll increases may occur
under private management.• Enabling legislation needed.
A variation of privatization in which elements of a service previously run solely by the public sector are provided through a partnership between the government and one or more private sector companies. Unlike a full privatization, P3’s are a risk sharing relationship between the public and the private sector. The spectrum of contractual arrangements between the Department and a private partner can vary from operation and management contracts to leases, to the outright sale of an asset.
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• Pay as you drive already in place for car insurance and leasing charges.
• Self-reporting odometer or official odometer inspections; MPG-rating based mileage systems; RFID tags with filling station quarterly remittances; current OBDII systems for on-board mileage monitoring combined with cellular technology are all possibilities with a host of challenges.
• States are waiting for the federal government to determine a system for collecting the federal highway trust fund revenues so they can piggy-back onto it. No sooner than 2015 and probably beyond.
Other OPTIONSVehicle Miles Traveled (VMT)
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Other OPTIONSVehicle Miles Traveled (VMT)
(continued)
Pros:• Equity - Users pay for actual
road usage.• Provides long term solution to
depleting gas tax revenues due to fuel efficient vehicles and the increasing number of alternative fuel vehicles.
Cons: • Technology not yet available
for assessing. • Infrastructure not in place for
assessing and/or collecting.• Privacy concerns.• New fee.• Collection costs are high
compared to gas tax.• Needs national solution.
This is a fee assessed on miles traveled.
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Federal Sources of Funding and Future Prospects
Federal Transportation Authorizations
Federal Transportation Legislation identifies levels of funding that could be made available to states based upon expected federal revenues. These funding levels, or authorizations, set the benchmark for future funding and spending levels. These authorizations are made or modified through Federal Surface Transportation Acts or other special federal legislation.
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Federal Transportation Authorizations
The Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991 established requirements for extensive planning and flexibility of federal funds for projects, including Transportation Enhancement, Surface Transportation Program, Bridge, and Congestion Mitigation and Air Quality projects.
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Federal Transportation Authorizations (continued)
The NHS Designation Act of 1995 defined the National Highway System for the United States. This highway network was identified as being important for the nation’s economy, defense and mobility. The Act also made adjustments to funding authorizations that exceeded those that were set up in ISTEA.
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Federal Transportation Authorizations (continued)
The Transportation Equity Act for the 21st Century (TEA - 21) was signed into law in 1998. This Act re-affirmed the goals of ISTEA and provided increased funding and flexibility to the states to provide safer and more efficient transportation facilities and networks.
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Federal Transportation Authorizations (continued)
The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) was signed into law on August 10, 2005 and expired as of September 30, 2009. The current authorization has been extended 5 times to now end in December 2010. If current Authorization is not reauthorized or extended, the Federal Aid Transportation funding shuts down (there was a brief shut down in March 2010).
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Federal Apportionments
• Apportionments are made annually by the Congress for the Federal Fiscal year (from October 1 – September 30 of the following year). These apportionments break down the general categories of funding identified in the authorizing legislation. They identify the amount of money available to specific funding categories on a national and state level in Formula and Non-Formula funding categories.
• These apportionments are made through two major sources, Federal Highway Administration (FHWA) and Federal Transit Administration (FTA). Typically, FHWA funds are used for highway related projects and FTA funds are used for transit related projects.
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Formula Apportionments vs.
Non-Formula Allocations• Formula funding categories are those that are typically
defined through legislation and remain constant over the life of that legislation. Categories include Interstate Maintenance, National Highway System, Surface Transportation Program, Bridge Program, Congestion Mitigation and Air Quality, and Transportation Enhancement.
• Non-Formula or allocations are made for special funding categories. These categories include Scenic Byways and Forest Highway Programs, where funding levels can change substantially from year to year, and specific congressionally designated projects such as the Newington Dover Little Bay Bridge Project and Nashua River Bridge, with a defined amount of money allotted to them.
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Obligational Authority
• The amount of federal money received from the Federal Highway Administration that can be spent in a given Federal Fiscal year (October 1 through September 30 of the following year) is called the obligational authority/limitation. The actual amount to be received each year by the States is determined by annual Appropriations Bills passed by Congress. The amount in the Appropriations Bill usually does not match the amount shown in the Transportation Act, and in most years, the amount is less than in the Transportation Act. As a result, states will end up with unobligated (leftover) balances in certain funding categories at the end of each fiscal year
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Hard Match and Soft Match
Most of the Federal Funds come with a matching requirement – i.e. part of the total cost requires a state or local contribution, commonly called the match. FHWA Funds typically require a 10% or 20% match amount. This match amount can be a cash match, also known as hard match, or operating budgets pledge, known as soft match. For example, the Congestion Mitigation and Air Quality (CMAQ) projects require a 20% match. A public service announcement project selected for CMAQ funding may pledge broadcast time as a soft match.
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Federal Aid Program Nationwide 2010
Highways / Bridges $42 B / yr Transit $11 B / yr
$53 B / yr Funding
Fed Gas Tax 18.4¢ / gallonFed Diesel Tax 24.4¢ / gallon
New Hampshire’s Share Highways / Bridges
Formula Funds $ 140 M / yr Non Formula, Earmark, Redistribution $ 15 M / yr
TransitFormula Funds $ 11M/yr
Earmarks $ 1M/yr
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Federal Aid Authorization – 6 yrs
of funding ISTEA 1992 – 1997TEA – 21 1998 – 2003 / 2004 extended SAFETEA – LU 2005 – 2009
Current Authorization ended September 30, 2009.
Current Authorization extended 5 times to now end December 31, 2010.
If current Authorization is not Reauthorized or extended by December 31, 2010, Federal Aid Transportation funding
shuts down.
(There was a brief shut down in March 2010)
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Federal Aid Program (Highway/Bridge & Transit)
Revenue Projected to be available 2010 thru 2015 2010 2011 2012 2013 2014 2015 $53B $54B $29B $43B $44B $44B
The Federal Highway Trust Fund Revenues have declined during the current Authorization (SAFETEA-LU).
In response the Federal General Fund has transferred revenue to the Trust Fund. 9/15/08 Transfer of $8B8/7/09 Transfer of $7B 3/1/10 Transfer of $19.5B
Without another transfer, funds available will decrease by 46% in 2012.
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The Federal Aid Program is Uncertain
Lacks Adequate Funding
Lacks Direction
Lacks Unified Support
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Federal Funding Discussion
Possible Revenue Sources Under Discussion1. Increase fuel tax
2. Convert fuel tax from cents-per-gallon to percentage basisGasoline 18.4¢ to 8.4%
Diesel 24.4¢ to 10.6%
3. Place importation fees on fuels.
4. Direct Carbon Tax / Cap & Trade Revenue to Trust Fund
5. Vehicle Miles Traveled fees
Other Possible Revenue Mechanisms Under Discussion
1. Infrastructure Bank
2. GARVEE Bonds
3. Toll highways
4. TIFIA financing
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National Direction
Lacks DirectionWhat once was a very direct mission to build a first rate interstate and primary highway system, the mission has become increasingly fractured and marginalized, and its requirements increasingly more onerous.
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Use of Federal Funds Has Expanded and Fractured
In the beginning…1. Fed Aid was for capital
construction.
2. Fed Aid was pay-as-you-go, cash based financing.
3. Fed Aid was managed by USDOT and prioritized and administered by State DOTs.
4. Fed Aid earmarks were purview of Congress and individual members.
Now…Fed Aid may be used for maintenance and operations.
Fed Aid may be used for debt (bonding) financing.
Fed Aid via grants is managed and prioritized by USDOT.
Fed Aid grants are purview of USDOT.
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EXHIBIT 7
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NH DOT 2012 – 2013 Budget Highway Fund and Betterment Fund
Revenue Challenge $30 Registration Fee Sunsets 6/30/11
loss of $85.6MI-95 Sale Revenue Decrease from $50M to $11.8M
loss of $38.2M
ImpactHighway Fund Decreases by $ 98.6MBetterment Fund Decreases by $ 15.0MBlock Grant Aid Decreases by $ 10.3M
Total $ 123.9M
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Highway Fund Revenue Losses
Registration Fee Sunsets & Reduction in I-95 Payments
• In accordance with legislation, the $30 Registration Surcharge will sunset on June 30, 2011, which equates to a loss of revenue of approximately $86M for the next biennium.
• Additionally, the revenue the Highway Fund receives from the sale of I-95 will decrease from $50M to approximately $12M, resulting in a loss of revenue of $38M.
• Therefore the net reduction in revenue for the biennium is approximately $124M.
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Projected Deficits:I-93 Widening Project
• The Salem-Manchester I-93 widening project involves widening the highway from 2 lanes to 4 lanes in each direction and rebuilding 5 interchanges. Due to environmental commitments regarding salt intrusion in water bodies, the highway footprint will be constructed for 4 lanes in each direction, but will only be paved to operate with 3 lanes in each direction. Once the State and local communities are able to reduce salt intrusion to meet environmental standards, the 4th lane in each direction can be paved and operated.
• While the widening of I-93 remains the State’s highest priority, funding is only available for the segment from Exit 3 south and for Exit 5 at a cost of $380M. The remaining segment north of Exit 3 (estimated to cost $230M) remains unfunded.
• The projected deficit is underscored by the uncertainty and inadequacy of federal funding.
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Widening and Modernization of I-93 Jeopardized
I-93 improvements are the State’s #1 priority project, as defined by law. Completion by 2020, per record of decision, will be in jeopardy without a funding source and completion may be delayed beyond 2030.
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Expansion of I-93 as Highest Priority
Chapter 273:1, Laws of 2000, Chapter 329:1, Laws of 2008
273:1 Priority Construction.I. The commissioner of the department of transportation shall give very high
priority to the construction projects relative to the widening of Interstate 93 from Manchester to the Massachusetts border.
II. The commissioner of the department of transportation, excepting special appropriations, shall use previously and subsequently apportioned federal funds and previously and subsequently appropriated state funds for the projects under paragraph I.
III. The commissioner of the department of transportation shall take all necessary actions to ensure that the state of New Hampshire does not lapse or lose the federal funds.
IV. Once work has commenced on any one of the various construction projects that constitute the 18-mile widening of Interstate 93 from Manchester to the Massachusetts border, the commissioner of the department of transportation shall expedite all Interstate 93 construction projects within the entire 18-mile corridor until their completion.
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Expansion of I-93 as Highest Priority (continued)
Chapter 231:5, Laws of 2010 (RSA 240, Ten Year Transportation Plan )
231:5 Interstate Route 93 Priority. Pursuant to 2000, 273:1, as amended by 2008, 329:1, the general court reiterates that the state of New Hampshire’s top priority is the reconstruction and widening of Interstate Route 93 from the Massachusetts border to Interstate Route 293 in Manchester to 4 lanes in both directions within the time frame of New Hampshire Ten Year State Transportation Improvement Plan. The general court further understands that the projected revenue is presently inadequate to fully fund the entire project, specifically, capacity improvements north of exit 3. To the extent alternative or additional funding becomes available for the reconstruction and widening of Interstate Route 93 from Salem to Manchester, the expenditure of such funds is hereby authorized.
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Projected Funding Needs: Loss of Revenue from Manchester Airport
Access Road (MAAR)• It is projected that the Turnpike System will lose $6 million in toll
revenue with the completion of the Manchester Airport Access Road (scheduled to open in fall of 2011 or spring of 2012). The roadway will enable travelers to the airport to avoid the Bedford tolls. No tolls are proposed or currently planned at the entry ramps or the mainline of the Access Road. The loss in revenue, if not addressed, will burden the rest of the system with an inability to construct the projects authorized under HB 391, Chapter 146, Laws of 2009 (i.e., Hooksett and Bedford ORT, Dover end of the Newington-Dover Little Bay Bridge-Spaulding Turnpike widening project), as well as address future capital needs on the Turnpike System that are under study.
• Recapturing the projected loss of $6 million when the MAAR opens may permit the ability to fund implementation of the open road tolling projects authorized under HB 391 (Chapter 146, Laws of 2009).
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Inflation/Cost of Material
• Inflationary cost of construction and materials is currently stagnant due to the recession. Prior to the recession, costs were 5 to 20% higher than current costs. For planning purposes and in our financial modeling, construction costs are estimated to increase 3.2% annually and operating costs increase 3.0% annually.
• In addition to 3% annual inflation factor on the operating budget, the Department is preparing, as directed by the Governor’s office, an operating budget that is 95% of its FY11 budget for the next biennium.
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Projected Funding Needs:Turnpike Capital Program
• The turnpike capital program is authorized to spend $560M.
• Anticipated revenue with no further toll increases can support $450M worth of construction in the next 9 years.
• With a toll increase in Rochester, Hooksett, and Bedford, the program could be increased to $840M. The additional toll revenue would allow the Department to complete projects in a timely manner, thereby realizing savings by avoiding inflationary costs of construction and materials.
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Highway Fund: Transportation Budget Shortfalls
If funding is not found to restore the $124M reduction in revenue to the Highway Fund and Betterment Fund, the Department of Transportation will need to make dramatic cuts in programs and services:
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Highway Fund: Transportation Budget Shortfalls (continued)
DEPARTMENT: Division of Operations - potential reduction of $22M/biennium.
Division of Project Development – potential reduction of $34M/biennium.
• The preceding possible cuts are in addition to $20 million in cost savings and efficiencies made by the Department in 2009, including: 42 positions unfunded; hedged fuel purchases; increased use of Turnpike Toll Credits in lieu of hard match for federal funds.
• Since operational cuts only cover $56M of the $124M loss in revenue, it will be necessary to look at reducing the Betterment Program and Legislative Programs for Cities and Towns (i.e. Block Grant Aid, State Aid Highway, State Aid Bridge) to address the revenue shortfall.
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Highway Fund: State Aid Highway and Bridge Allocation
Shortfalls
• If the State Aid Highway Program was cut over the biennium, there would be a reduction of 7 projects.
• If the State Aid Bridge Program was cut over the biennium, there would be a reduction of 23 bridge projects.
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Possible Legislative Cuts to Account for Reduced Revenue
Legislative Programs for Cities and Towns
Eliminate all (or portions) of Block Grant Aid $30.6M/yrEliminate all (or portions) of State Aid Highway (SAH) $ 1.7M/yrEliminate all (or portions) of State Aid Bridge (SAB) $ 6.8M/yr
Total $ 39.1M/yr
Block Grant Aid is 12% of the total Highway Fund revenue (gas tax and registration fees raised in a year) and is distributed to each of the state’s 234 municipalities based on road mileage and population. A city like Concord receives approx. $740,000 (2010) and a town like Bartlett receives approx. $90,000 (2010).
SAH funds are available for municipalities to improve state highways with the state paying 2/3, and the town paying 1/3.
SAB funds are available for municipalities to improve local bridges with the state paying 80% and the town paying 20%.
Requires Legislative Action
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DOT: Consequences of Budget Cuts
Legislative Programs for Cities and Towns
Reduce municipalities’ ability to address local transportation-related needs.Miles of local roadways are 11,865 miles.Number of local bridges in SAB Program is 106 bridges over a 10 year period.
Division of Operations
Further encroachment of foliage on highways resulting in safety issues, increased salt usage, disrepair of ditch lines.Less summer maintenance (ditching, culverts, guardrail, shoulder work).Inability to address graffiti issue.Less bridge preservation work.Less ability to respond to bridge emergency work.Less striping performed by private contractors, reducing funding for capital construction.Delay in repairing/replacing signs.
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DOT: Consequences of Budget Cuts (continued)
Division of Project Development
Delays development of capital projects.Stifles workforce development and succession planning in engineering and technical fields.Reduces funding available to turnpike capital construction program.Reduces funding available to Federal Aid capital construction program.
Betterment Program
Reduces yearly paving program to 250 miles or less ($18M to $12 M)Reduces secondary highway construction ($ 6M to $ 2.4M)Reduces culvert replacement program ($ 1.5M to $ 0.3M)Reduces number of intersection improvements ($ 1.2M to $ 0.5M)Reduces guardrail replacement ($ 1.8M to $ 1.2M)
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DOT: Proactive Steps Taken
In terms of being proactive, the DOT is:• Pursuing LEAN principles to measure costs.• Coordinating with partners.• Utilizing design-build contracting.• Overseeing a pilot program for statewide fleet
management.• Securing statewide diesel and unleaded fuel
contracts at fixed prices.• Developing a financial forecasting model to
better manage the Highway Fund and the Turnpike Fund.
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This is a “view from 30,000 feet”
• It is impossible to give a definitive “alternative budget” at this early stage.
• The statutory portion of the Highway Fund “cap” that applies to the Department of Safety is calculated as a percentage of the total appropriation of Highway Funds and the Department does not know what the total appropriation will be.
Department of Safety
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Split Funding Adds to the Cuts• Because some Department of Safety operations
are “split funded”, i.e. 81% Highway/19% Turnpike for the State Police Traffic Bureau, to accomplish a cut of 25% in the Highway portion the Department has to make a similar cut in the 19% portion to maintain the funding ratio. In the Forensic Lab, which is funded 70% Highway/30% Agency Income a similar “additional cut” would be necessary.
Department of Safety (continued)
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Safety previously proactive to reduce use of Highway funds.
• In order to reduce the Department’s draw on the Highway Fund during the current biennium the Department took the Detective Bureau off the Highway Fund (previously 70% Highway), defunded 22 positions in State Police and 12 in DMV.
• In addition the Department charged an internal indirect cost against the self-funded Divisions (911, Safety Services, Homeland Security, Fire Academy and Fire Marshal) to pay for services formerly provided out of the Highway Fund.
Department of Safety (continued)
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Proactive Use of Hwy Funds…(2)
• The Department budgeted no replacement State Police vehicles during this biennium, so by FY 12-13 much of the fleet will be significantly older with higher mileage, and thus repair costs and safety considerations will be of concern.
• Lastly, the Department adjusted the fees charged by Criminal Records so that all costs related to that Bureau could be fee funded. This also resulted in previously Highway funded costs moving to Criminal Records.
Department of Safety (continued)
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Current Vacancies• The Department currently has 48 vacancies in State Police
(approximately 13% of the force). Some Troopers are currently covering 2 and 3 patrols instead of one.
• The Department depended on efficiencies such as the online driver license renewal system and the fact that all town and city clerks are now online with DMV to accommodate the personnel reduction in SFY10-11 at DMV while actually improving customer service.
Department of Safety (continued)
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Where cuts would likely come from• Although the Department could realize some cuts from other
expenditures, to realize this type of savings the majority of cuts would be from Salary and Benefits.
• Because State Police salaries and benefits are higher than those at DMV the lion’s share of $’s would have to come in State Police.
• In the Division of Motor Vehicles the total personnel costs, with benefits, of a Counter Clerk I will be $60,101 for SFY 2012.
• In the Division of State Police the total personnel costs, with benefits, of a Trooper I will be $81,387 for SFY 2012.
• Obviously these would not be the only salary classifications impacted but this gives you a feeling for the number of personnel necessary to reach a cut of this magnitude.
Department of Safety (continued)
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DOS Mission Statement
The multi-faceted mission of the Department of Safety encompasses protection of the lives and safety and preservation of the quality of life of New Hampshire citizens and visitors to our state on the highways, on the waterways, and in their homes and businesses. We enforce motor vehicle and highway safety laws, criminal laws, commercial vehicle regulations, fire safety, building and equipment safety laws and regulations, and boating safety laws and rules. We also provide enhanced 911 emergency communications statewide, and are responsible for homeland safety and emergency management activities.
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DOS Unable to Fulfill Mission?
• If the DMV Fees Sunset…• And gas tax revenues remain static, there will be
$118.8 million less revenue to the Highway Fund in the FY 12-13 biennium.
• If the Department of Safety had to absorb 25% of this reduction it would mean a cut of $29.7 million in the Department’s budget, or $14.85 million per year.
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DOS Unable to Fulfill Mission? (continued)
Built-in Challenges for FY 12-13• There are a number of built-in cost drivers that the
Department has little to no control over, including:• The State’s cost of Gasoline is 70 cents higher than last
year. There will be a new contract for SFY 12 which the Department won’t know the cost of until late SFY11.
• The Department’s share of Group II retirement has doubled from 12.2% to 25% of Law Enforcement salaries.
• SFY 12 has an additional payroll for a total of 27.• Healthcare cost increases 11% for each of 12 & 13.
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DOS Unable to Fulfill Mission? (continued)
If the Department had to absorb a proportionate share of Highway Fund revenue loss…This would reduce funding for the Office of the Commissioner, Division of State Police, Division of Motor Vehicles and the Division of Administration combined by about 18.5% of the SFY 2011 appropriation and the impact would virtually cripple Department operations.
Cuts of this magnitude will have significant impact on Public Safety, Quality of Life and Customer
Service to the Citizens of New Hampshire.
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DOT Mission Statement
• Mission: Transportation excellence enhancing the quality of life in New Hampshire.
• Purpose: Transportation excellence in New Hampshire is fundamental to the state’s sustainable economic development and land use, enhancing the environment, and preserving the unique character and quality of life. The Department will provide safe and secure mobility and travel options for all of the state’s residents, visitors, and goods movement, through a transportation system and services that are well maintained, efficient, reliable, and provide seamless interstate and intrastate connectivity.
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DOT Unable to Fulfill Their Mission
NH DOT will not be able to fulfill their mission if; • The motor vehicle registration surcharge, ending
June 30, 2011 is not renewed or replaced with another funding source .
• Bedford Toll isn’t relocated to prevent loss of $6M toll revenue.
• Cannot keep pace with inflation.• Source of revenue is not found to replace
decreasing gas tax revenue.• Federal funding remains uncertain.
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Cumulative Effects
• I-93 widening and modernization completion delayed until 2030 or later
• Ten Year Plan funding remains in a deficit• Red Listed bridges• Operational funds for NHDOT to meet repair and safety mission are
eroded and service levels will decline• Reduction in road paving schedule - paving will return to 250 miles
per year instead of 500 miles• There has been and continues to be a reduction in the construction
program. In the current biennium, increased indirect costs billed against federal program dollars and aggressive use of turnpike toll credits versus traditional hard match have reduced programmed construction funding by almost $65M, or approximately 19% of the traditional program. Future use of toll credits, soft match, and indirects in lieu of hard match will continue to erode the Capital Program.
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Commission Recommendation Vehicle Miles Traveled (VMT)
The Commission recognizes VMT fees are the future and recommends the Departments of Safety and Transportation monitor the progress of VMT technology and plan for implementing a collection and assessment system.
The Commission recognizes that a national change may be required in order for New Hampshire to implement a VMT system.
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Commission Recommendation Regular Toll Rate Review
• The Commission recommends that the Executive Council regularly review the turnpike system capital program and revenue needs. In order to address capital construction needs beyond the currently planned program, an increase in tolls will be required.
• The Commission recommends the General Court review toll locations for maximum collection, i.e. the loss of approximately $6 million dollars to the F.E. Everett Turnpike when the Manchester Airport Access road opens.
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Commission RecommendationBonding – GARVEE Bonds Cap
The Commission recommends that the Legislature cap GARVEE bonds at a rate it
deems appropriate.
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Summary The economic vitality and growth of our state along with the safety of our citizens will be in jeopardy if the
funding shortfall is not reversed.
• Looking out 10-20 years without additional revenue, the projected shortfall for FY2020 (operating and capital) is $1.2 billion
• Inaction is not an option. The situation is at a breaking point.
• The DOT has made cuts for efficiency and cost savings, doing more with less. For example, while the number of daily Vehicle Miles Traveled statewide has increased significantly through the years, the number of Department employees has decreased significantly.
• Concerns regarding diversion of highway funds and turnpike funds have been addressed through prior legislation.
• In terms of projects, even if the DOT’s current revenues were to continue at the same rate, additional revenues are still necessary to fund the I-93 widening project and the rest of the Ten Year Plan.
• The DOT’s current revenues will not be sustained in the next biennium due to the sunsetting of the registration surcharge and the decreased revenues from the I-95 transfer.
• It is necessary to bring in additional sustainable revenue.
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HB 2010, Chapter 0231, Laws of 2010 STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Ten• AN ACT relative to the state 10-year transportation improvement program, authorizing the issuance of federal highway grant anticipation
bonds to finance the replacement of the Memorial Bridge in Portsmouth, New Hampshire, and establishing a commission to study the F.E. Everett Turnpike.
Be it Enacted by the Senate and House of Representatives in General Court convened:• 231:1 State 10-Year Transportation Improvement Plan. The legislature hereby adopts the plan known as the “State of New Hampshire Ten
Year Transportation Improvement Plan 2011-2020 Submitted by the House Public Works and Highways Committee as Part of the Legislative Process Pursuant to RSA 228:99 and RSA 240 of the Laws of New Hampshire” and encourages expeditious implementation of the projects shown therein.
• 231:2 Highway Fund Shortfall. The general court recognizes and appreciates the excellent work of our local communities, the regional planning commissions, the department of transportation and GACIT in developing the State of New Hampshire Ten Year Transportation Improvement Plan for 2011-2020. However, the general court recognizes that there is significant shortfall in the highway fund that will not allow the completion of all the projects contained in the plan. This will, in the absence of additional revenues, require the delay or elimination of many of the projects in this and future Ten Year Transportation Improvement Plans. The general court desires that citizens recognize that this revenue shortfall exists and that many listed highway projects may be significantly delayed or eliminated.
• 231:3 Turnpike Fund Shortfall. The department of transportation has informed the general court that in order to fully fund and complete the projects listed under the New Hampshire Turnpike System, an increase in toll rates needs to be approved by the governor and council. If a toll increase is not enacted, some of the listed turnpike projects will be delayed or eliminated, including but not limited to open road tolling in Bedford and Hooksett, and the Spaulding Turnpike improvements north of Dover.
• 231:4 Federal Funding. Many of the highway, turnpike, aeronautic, mass transit, congestion mitigation and other projects listed in the State of New Hampshire Ten Year Transportation Improvement Plan rely on differing amounts of federal funding, the receipt of which is uncertain. Any reduction in the amounts of federal funds listed in this plan will require a dollar-for-dollar reduction in spending and, accordingly, the delay or elimination of certain projects.
• 231:5 Interstate Route 93 Priority. Pursuant to 2000, 273:1, as amended by 2008, 329:1, the general court reiterates that the state of New Hampshire’s top priority is the reconstruction and widening of Interstate Route 93 from the Massachusetts border to Interstate Route 293 in Manchester to 4 lanes in both directions within the time frame of New Hampshire Ten Year State Transportation Improvement Plan. The general court further understands that the projected revenue is presently inadequate to fully fund the entire project, specifically, capacity improvements north of exit 3. To the extent alternative or additional funding becomes available for the reconstruction and widening of Interstate Route 93 from Salem to Manchester, the expenditure of such funds is hereby authorized.
• 231:13 Issuance of Revenue Bonds; Replacement of Memorial Bridge in Portsmouth. Amend RSA 228-A:2 to read as follows:• 228-A:2 Issuance of Revenue Bonds. …. The bonds shall be issued by the treasurer in such amounts as the governor and council shall determine, not exceeding
$195,000,000 for Interstate 93 and $45,000,000 for the replacement or repair of the Memorial Bridge and the Sarah Mildred Long Bridge. Debt service for federal highway grant anticipation bonds (Garvee bonds) for the bridges shall be paid from a portion of future federal bridge funds. ….
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Appendices1. Gas taxes give us a break at the pump, Dennis Cauchon, USA TODAY,
July 2, 2010 2. Moving New Hampshire Forward: The Condition and Funding of New
Hampshire’s Roads, Bridges & Transit Systems, TRIP, June 2010, 3. Presentation to the Financing Commission: Financing the I-93 Project,
NHDOT, J.P.Morgan, September 27, 20104. Transportation Funding, How Do You Pay For It? Presentation by Dennis
Lebo and Gannett Fleming, August 16, 20105. Paying Our Way, A New Framework for Transportation Finance, Report of
the National Surface Transportation Infrastructure Financing Commission, February 26, 2009
6. Funding a Transformational Transportation Bill, Options for Discussion and Principles, Brookings, November 2009
7. Highway Funding & Political Will, New Hampshire Highways, New Hampshire Good Roads Association, October-December 2010
8. New Hampshire Highway Study Committees 1991-2008, House Committee Research Office, October 4, 2010