Stimulus could fund local roads

On May 7, 2009, in News 2009, by Mark Norris

Bill would bank fed money to back low-interest loans

By Christina E. Sanchez • THE TENNESSEAN
May 7, 2009

The Memphis-area lawmaker believes he’s found a way to sock away millions of those dollars, while also helping local governments in Tennessee pay for needed roads, bridges and transit projects.

Lawmakers are considering Norris’ bill, which would allow those governments to borrow from a new fund at below-market interest rates and with flexible repayment terms.

The State Transportation Infrastructure Fund also would let Tennessee capture a portion of $200 million in stimulus funds still available and not have to spend the money right away.

“There are more projects that need funding than there is funding,” said Norris, R-Collierville, who is co-sponsoring the bill with Rep. Charles Sargent, R-Franklin. “One of the frustrations with stimulus money is that we can’t put it in the bank, and that we have to spend it right away. I found an avenue to allows us to do that.”

Tennessee would join 33 other states to create a state transportation infrastructure fund in hopes of diversifying funding options.

The state will get about $572 million from the federal stimulus package for road projects over the next three years.

Beyond that, the 21.4-cent fuel tax remains the main source of transportation funding, and collections are down $40 million so far compared with last year.

“Our gasoline sales tax revenues certainly have declined. Year-to-year it’s been dropping,” Rutherford County Mayor Ernest Burgess said. “We are doing limited maintenance on our roads, some in partnership with the city of Murfreesboro.”

The county maintains about 1,300 miles of roads, work funded largely by gasoline taxes.

Burgess hadn’t heard about the fund until Wednesday, but he said it could have potential.

“We have 20-year bonds at about 4.5 percent interest rates, but if there is a program that can offer lower rates it would be worth looking at,” he said.

Local highway officials across the state share Rutherford’s struggles. But a nonprofit group that represents them says there’s no guarantee the legislation, SB2120 and HB2186, offers the best solution.

“Good option, bad option? We don’t know,” said Rodney Carmical, executive director for the Tennessee County Highway Officials Association. “It’s an option. The concept is great, but the issue is we don’t really have the money to pay back a loan, even a low-interest loan.”

Group offers ideas

Norris is a member of the legislature’s Transportation Funding Options Committee, which for months has looked for ways to raise money for infrastructure.

One funding idea, increasing the gas tax or tying it to inflation, was shelved Tuesday for lack of support. Another would create toll lanes on existing, congested highways for drivers who want to pay for faster travel.

The committee helped craft successful legislation to stop the state from taking any money out of the road fund to help balance the general fund.

More than $290 million has been diverted from the state roads fund over seven years. The governor has not signed the measure into law.

The Tennessee Department of Transportation has said it would need an extra $800 million annually to keep up with long-term road building and maintenance, needs that TDOT last year estimated would reach $6 billion to $8 billion over the next 10 years.

“We are in favor of efforts to increase transportation resources as long as it does not divert current revenue sources and/or create a new level of bureaucracy,” said Julie A. Oaks, TDOT spokeswoman.

The Tennessee Local Development Authority, part of the Comptroller of the Treasury’s office, would oversee the proposed fund.

The authority is responsible for issuing bonds and notes to provide project funding to local governments.

Members include the governor, commissioner of finance, three officers and two appointees chosen by the speakers of the House and Senate.

Jeremy Davis, who is Norris’ executive assistant for policy research, said the initial capital, about $2 million, would come from an existing Tennessee infrastructure bank created under a federal pilot program in the late 1990s.

Additional money could come from the $200 million in federal stimulus money available to the states that have funds like the one Tennessee proposes.

More money probably would be needed, though where that would come from has not been decided.

“We’re waiting to see what Congress does with (the federal transportation funding) bill that is up for renewal and how they will fund it,” Davis said.

Carmical, head of the state highway officials’ group, said the success of the fund would depend on where they get the money. Better funding options would be welcomed.

“Funding for local projects is nonexistent right now,” Carmical said. “We’re falling behind every day, and we’re in total maintenance mode.”

Norris said other options to raise money for transportation aren’t likely anytime soon. He hopes to draw ideas from federal officials when transportation options are revisited in the fall.

Also, he noted, the state needs to regain taxpayers’ trust after years of diverting road funds to other areas of government.

“It is one of the critical issues of our time, but it is going to take time to resolve it,” Norris said.

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