DALLAS — Kansas sees a $1.5 billion annual gap over the next 20 years between infrastructure needs and available revenue, with needs of $2.95 billion a year outstripping $1.43 billion of city, state, and federal funding.
Potential solutions to the funding gap outlined in a draft plan developed by the Kansas Department of Transportation include expanding its bonding authority, indexing fuel and vehicle taxes to the inflation rate, and financing at least a portion of new highway projects through tolls or private investments.
Plan project manager Kyle Schneweis said the 20-year, $30 billion funding gap will probably never be completely eliminated.
“People see a $1.5 billion gap, and they get nervous,” Schneweis said. “It looks like a lot of money, and it is, but we’re already spending more than $1 billion a year on transportation infrastructure in Kansas.”
“We don’t expect to meet all the needs in the study,” he added. “We’re trying to set out the needs and explore the policy options. We want people to start realizing the extent of the situation and determine how to prioritize the transportation needs of this state.”
The draft long-range transportation plan predicts annual needs averaging $1.6 billion for extending and maintaining state highways, $1 billion a year for city and county streets and roads, and $350 million for public transit, rail, and aviation.
Average annual revenues dedicated to transportation are expected to total $830 million from state sources, $325 million in federal grants, and $270 million from local governments.
The plan covers the period from 2010 to 2030, and assumes inflation averaging 2.8% per year. It is available online at www.kansaslrtp.org.
Total funding for transportation has averaged $1.6 billion a year over the past 10 years, including $423 million from the state fuel tax, $392 million in federal grants, $291 million in local tax revenues, $210 million in state highway bond proceeds, $164 million in vehicle registration fees, and $163 million in sales tax revenues.
However, inflation is expected to significantly erode many of the sources unless steps are taken, the study noted. Revenue growth is estimated at 1.7% a year over the next 20 years, but the projected annual inflation rate of 2.8% will result in a loss of purchasing power of some $280 million a year.
“If hyperinflation in construction costs repeats the pattern of the last decade (6% to 8% annual inflation), the decrease in purchasing power could be more severe,” the plan said.
KDOT is at the limit of its legislatively authorized bonding capacity, the plan said, and will need specific approval to issue additional debt.
The department has issued $1.3 billion in highway revenue bonds over the past 10 years, and received the proceeds from $210 million of bonds supported by the state general fund. KDOT revenue bonds have underlying ratings of AAA by Standard & Poor’s, Aa2 from Moody’s Investors Service, and AA from Fitch Ratings.
Under the plan, between $3 billion to $5 billion of additional highway bonds could be issued over the next 20 years based on the debt that could be supported by 15% to 25% of expected revenues.
Since 1999, annual debt service on KDOT’s bonds has averaged $120 million, or about 14% of the annual revenues available for operations and construction.
The ratio of debt service to total revenue will remain at 14% through 2012, and then fall gradually as revenues increase and total debt falls. The plan said annual debt service requirements from existing debt will climb to $150 million for a few years and then gradually decline until all current outstanding debt is retired in 2025.
Additional local funding for transportation could be provided by expanding the state’s bond-based transportation revolving fund. Local governments use the loans to meet the required matches for state and federal grants.
Since 2003, the plan said, the program overseen by Kansas Development Finance Authority has leveraged $70 million in grants through $25 million in local funding.
The loan repayments from the local entities supports the debt service on bonds issued by the authority, with revenues in excess of debt service being recycled as additional loans that are also pledged to the bonds.
The KDFA’s transportation revolving fund bonds are rated AA by Standard & Poor’s and Aa2 by Moody’s.