By Stephen H. Miller, Chairman of the Missouri Highways and Transportation Commission
Some have wondered over the last several weeks whether re-instating the MoDOT cost-share program or creating some other form of cost-share might offer a solution to the current funding crisis. A cost-share program can be an effective tool for certain targeted projects but it is important to understand how it works, the appropriate uses for it and its limitations.
MoDOT developed a cost-share program to provide financial assistance to local communities in developing state highway and bridge projects those communities considered to be of particular importance. Typically it takes the form of a project which a community hopes to expedite years ahead of schedule or a project to attract additional economic development opportunities. Historically such projects have not been aimed at preserving the current system but in adding to it in some capacity (e.g. upgrading a two-lane corridor to four lanes or building a new interchange.)
On a cost-share project, MoDOT agrees to match up to 50 percent of the total project costs on the state highway system; anything off the state system must be paid for by the local community. On certain projects with an economic development component, MoDOT may participate up to 100 percent where the Department of Economic Development verifies the creation of a targeted number of jobs. Local communities compete for such funding based on economic development, transportation need and public benefit.
The local share may come from three sources: (i) local revenues such as sales tax, (ii) the local entity’s share of federal funds (“suballocated funds”) or, (iii) the local’s share of state taxes and fees. Taxes raised by a local entity increase the overall transportation funding pie by adding new local funds beyond those contributed from federal and state sources. Suballocated funds, however, do not contribute any additional funds to the transportation funding pie because they simply direct existing federal or state dollars to a cost-share project. The local share of state revenue adds to MoDOT’s funding pie but not to the overall transportation system of the whole state; it simply diverts monies needed to take care of local roads to the state system.
There are two problems with this scenario. First, historically many communities have not raised local taxes but have simply used their suballocated funds for the cost-share match and suballocated funds add no new revenue. Second, many communities are either unwilling or unable to increase local taxes and without an increase in local taxes, there is no new funding.
Because it allows local entities to leverage their money and target desirable projects, the cost-share program has been very popular with certain regions and communities in the state which are economically vibrant and/or particularly committed to devoting monies to infrastructure. Many communities, however, face their own budget woes and have been unable to participate in the cost-share program.
The Commission favors the strategic use of cost share. For that reason during my early years on the Commission, we grew the cost-share program to approximately $45 million per year. During those years, however, there was still funding from our bond program (Amendment 3), the federal stimulus (the American Recovery and Reinvestment Act) and savings from MoDOT’s downsizing effort ($605 million) – all of which allowed us to take care of the system and fund cost-share. When those funding sources dried up and we approached the financial cliff we had warned of for years, there was insufficient funding to preserve the current system.
Since Missourians have consistently told us their top priority is preserving the assets we already have – not adding more assets – the Commission, in order to be fiscally responsible, suspended the cost-share program in January, 2014, thereby putting the $45 million budgeted for cost-share to work to preserve the system. Because the cost-share program is not an effective tool for state-wide preservation such as a bridge program to replace or repair our 641 critical-condition bridges, the Commission at its meeting last week voted to continue the suspension of the cost-share program through 2018.
The proposal to allocate general revenue to a cost-share program could be applied to some projects but it would not allow MoDOT to address the most critical needs because it introduces very large variables. First, there would be no guarantee from year to year that the General Assembly would continue to vote to take money from the general fund and appropriate it to transportation. Second, even if the General Assembly provides general revenue, there is no guarantee that cash-strapped cities, counties and communities will raise their own taxes, rather than simply relying on suballocated funds or their share of state revenues. Third, local communities have traditionally been interested in expanding the system not the very unglamorous work of taking care of it.
Taking care of our transportation assets is a lot like taking care of one’s home. It might be great to add a new family room but before you do that, you want to make certain you are continuing each year to maintain the home’s foundation, electrical, plumbing and HVAC systems while still keeping the lights on and the water running.
It is a goal of the Commission to one day restore the cost-share program because it is a very effective tool and a way to leverage local funding for special projects. But, before that occurs, MoDOT must have a new recurring revenue source – like an increase in the fuel user tax. While extra funding from general revenue might offer a welcomed hand to fund certain special projects through a cost-share approach, it is not a system-wide solution. For that, $160 million is needed annually to enable MoDOT to adequately operate and maintain the existing transportation network; make progress on bridge conditions and reinstitute the cost-share program to encourage transportation projects that foster economic development.
But, if the General Assembly funds a cost-share program, we will gladly welcome the assistance and rest assured that we will see that such monies are put to their highest and best use. As I noted in my last “View,” we have three different “buckets” of need with their own unique solutions. Cost-share addresses the third bucket – system enhancement. We need to fill them all. What we can least afford is to allow another year to pass without action. Nor, confusion over which possible solution to pick, to keep us from acting. We need multiple solutions and action on multiple fronts. We cannot afford paralysis or partisanship on such an important issue. The eyes of all Missourians are on all those in leadership positions.
Let’s take the first step right now,
Stephen R. Miller
Chairman
