by James A. Bacon
The Virginia Department of Transportation (VDOT) has a system for dispensing its approximately $2 billion a year in construction funding that is so blindingly complex that only a few people understand it. If I started explaining it to you in detail, I’d probably have to shoot you halfway through to put you out of your misery.
But I’ll give you a quickie overview so you can understand what the McAuliffe administration, working with Republican leaders in the General Assembly, is trying to accomplish by overhauling the funding formula. The end result, said Transportation Secretary Aubrey Layne in an interview yesterday with Bacon’s Rebellion, will be to transfer decision-making power from the executive branch to a more autonomous Commonwealth Transportation Board, allowing the CTB to function as the policy-setting group it was always meant to be.
Construction dollars come from two sources: state and federal. Roughly $900 million a year in state tax revenues goes into the Transportation Trust Fund. Before anything is spent on state construction projects, money is siphoned into the Highway Maintenance Operations Fund to make up for that fund’s perennial deficits. More money is sluiced away for revenue sharing with localities, and yet more for various administrative expenses. Whatever is left can be spent on construction.
Meanwhile, the $1.1 billion or so in federal highway dollars gets sliced and diced, with dollars peeled away to pay off GARVEE bonds, to maintain U.S. bridges and highways, and to fund miscellaneous programs dictated by Uncle Sam. Whatever is left can be spent on construction.
Thanks to the influx of new state tax dollars, there’s a fair amount of money available for construction these days. But as a practical matter, expenditures are so hemmed in by legislative formulas that the system has little flexibility. Under the 2012 transportation funding overhaul, available funds are to be divvied up as follows: 25% to bridges, 25% to pavement, 25% to high priority discretionary projects, 15% to public-private partnerships 5% to unpaved roads, and 5% to intelligent transportation systems. If there’s any money left over — which there isn’t, even with the 2012 tax increases — additional sums go to unpaved roads and to Interstate matches, and the remainder gets divvied up this way: 40% for primary roads (distributed to each of nine transportation districts), 30% for secondary roads (distributed to individual localities), and 30% to urban roads (cities and towns).
“It is a maze. It is opaque,” Layne said. It’s also inefficient.
As a practical matter, little money trickles down to the localities. It’s like the Colorado River — so much water has been sucked out along the way that there’s only a rivulet by the time it reaches the ocean. By the time money seeps down to individual transportation districts and individual localities, the amounts are so small they take years to accumulate enough money to actually pay for anything. As a result, money just sits there and gets eroded by inflation.
Another problem with the system, said Layne, who served on the CTB before McAuliffe anointed him transportation secretary, is that the executive branch effectively made all the key decisions. “When we came into office, VDOT was working off ‘the Governor’s List.’” The Governor’s List, an informal entity of obscure origin, was a list of projects reflecting the governor’s priorities, which VDOT then submitted to the CTB. “Where we are today, the governor sets the table,” said Layne. “As a CTB member, it’s hard to rearrange the dishes.”
(During the McDonnell administration, CTB members asked some questions and then invariably approved the requests — usually unanimously. The role of CTB members, I argued in “Kings of the Road” two years ago was to lobby behind the scenes to get projects in their transportation districts accepted by the administration. The board itself exercised little oversight.)
Layne’s goal, and McAuliffe’s, is to restore transparency and CTB independence. To make the policy-making board more independent, the administration is backing legislation that would curtail the executive’s ability to remove CTB members except where there’s cause. This would eliminate a repeat of instances like when former Transportation Secretary Sean Connaughton demanded the resignation of CTB member Jim Rich, a vocal proponent of the administration’s Charlottesville Bypass project.
The proposed new funding formula would create transparency by simplifying the system, Layne said. A new 40/30/30 formula would replace the 25/25/25/15/5/5 formula and portions of the 40/30/30 formula cobbled onto it. The new allocation formula would distribute money as follows:
- 40% for “state of good repair” projects, primarily bridges, Interstate high highway and primary road reconstruction.
- 30% distributed to the nine transportation districts. Local governments could apply for funds. The hope is that money will flow to the highest priority projects within each transportation district and that localities will cooperate to push projects with regional benefit.
- 30% distributed to projects of statewide priority. These projects will be rated under a new scoring system that tallies benefits, costs and Return on Investment. The CTB is not required to fund projects with the highest scores, but the scores will be public knowledge and the CTB will have to justify its decisions.
It’s difficult to know how these changes will work out in practice. Legislators likely will want to know whether their districts will get more money or less. Some may be concerned that the 30% allocated to projects on the basis of ROI will be steered mainly to Northern Virginia where congestion is worst and the need is greatest. But that’s not necessarily the case, said Layne. A Northern Virginia project may score high for benefits, but the cost may be high as well. Right of Way acquisition is far more expensive there, for example. He expects many downstate projects to show a high Return on Investment.
Layne argues that simplification, transparency and increased CTB autonomy will result in a overall better distribution of construction dollars. McAuliffe is willing to give up the political power that comes from maintaining the Governor’s List. His priority, said Layne, is, “Do the right projects.”
Layne said he wants a system that gets the most bang for the buck — “like I was allocating capital in my business.” He has told VDOT that it’s not in the road construction business — it’s in the asset-management business. With this reform package, he said, the CTB will focus on policy, and VDOT and the Department, Rail and Public Transportation and other executive offices will focus on carrying out that policy.
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