Paying for Transportation

Filed under: Opinion |

Editor’s note: In December, the University of Denver announced the formation of the Colorado Economic Futures Panel to analyze the state’s fiscal situation and provide a platform for informed discussion and possible solutions. Sixteen business and civic leaders from across the state comprise the panel, including Dick Celeste, president of Colorado College. This is part of a series of columns that the panel plans to submit until early April, when the panel expects to complete the first phase of its work.

The Colorado Economic Futures Panel has gathered volumes of fiscal information about our colorful state. There are many unfunded needs, but those of the Colorado Department of Transportation (CDOT) may be the largest of any state agency.

When we look back 25 years to 1980, Colorado’s population was 2.9 million, and today it is over 4.6 million, a 59 percent increase. During this same period, the daily miles traveled have increased nearly 100 percent. More miles traveled results in increased wear and tear on existing roads, as well as new construction demanded by increased traffic. The figures demonstrate the increasing pressure that’s already accumulated in funding the transportation system.

To CDOT’s credit, it recently adopted a projection of our transportation needs for the next 25 years, called the “2030 Plan.” Unfortunately, that plan estimates a huge shortfall between projected revenues and the estimated state and local construction and maintenance needs – about $48 billion – and that shortfall is simply to maintain the current level of state and local transportation service.

Even if the current state taxes on gasoline and fuel were doubled, (which may be an unlikely proposition) it would generate less than 20 percent of the amount needed, according to the CDOT plan.

To put the 25 year plan numbers into perspective, CDOT’s proposed Fiscal Year 2005-06 transportation financing budget is about $818 million. The average annual shortfall estimated under the 2030 Plan for what is actually needed to maintain current levels of service (an average of $1.9 billion more per year) is 2.3 times next year’s total budget.

The Legislature and the governor have made some moves to increase funding for transportation. Senate Bill 97-1 diverts about 10 percent of sales tax revenue to CDOT’s budget if there are surplus dollars available in the state general fund that do not have to be returned as a TABOR (Taxpayers Bill of Rights) refund.

From fiscal years 1998-2002 almost $750 million was available to be diverted to transportation needs. There have been no diversions since fiscal year 2002 because dollars have not been available, and no such dollars are projected to be available for the next few years.

In 1999 Colorado voters approved Referendum A, which allowed CDOT to borrow nearly $1.5 billion against anticipated future federal funds by selling Transportation Revenue Anticipation Notes (TRANS). This borrowed money has been able to fund some of the projects on a list of high priorities from all six CDOT districts (called the “Seventh Pot”), such as the T-REX project on Interstate 25 in southeast Denver.

There are still 11 of the 28 Seventh Pot projects that are not able to be completed with TRANS bonds proceeds. The principal and interest on these bonds ($168 million per year through 2017, about one third of which is the cost of interest) are required to be paid from CDOT’s normal annual operating budget, further limiting dollars available for meeting current and future transportation needs.

How will we climb out of this hole? The new Tolling Enterprise Authority may be able to finance some of the needed new construction, but it will not help the annual operating and maintenance budget.

Our constitutional restrictions on spending limit the state’s ability to fund the real costs of growth, especially in areas of public infrastructure like transportation. It is interesting to note that the TABOR refunds from 1999 and 2000 alone (which were over $1.6 billion) were greater than the total TRANS bond borrowing.

Had the state TABOR refunds from just two years been available for this purpose, we could have fully funded the TRANS projects and avoided the $168 million that now must be paid from the CDOT operating budget for each of the next 11 years. The money we saved could have funded most of the 11 remaining projects in the Seventh Pot.

Without voter approval, there will be no additional dollars flowing to our transportation needs. Without any new funding, the levels of service will drop dramatically.

We can expect 25 percent of the lane miles on state highways to be congested, instead of the current 10 percent, and 32 percent of the pavement quality will be rated fair/good, compared to 60 percent today. If we don’t change the way we maintain and improve our transportation system, we should plan on taking longer to drive to work, and the roads will be in much poorer shape.

Robert G. Tointon, vice chairman of Colorado Economic Futures Panel, is president of Phelps-Tointon, Inc., a family of manufacturing and specialty contracting companies that he formed in 1989.