DALLAS -- State highway and transit projects are likely to slow down or halt despite the two-month extension of the Highway Trust Fund signed over the weekend by President Obama, Fitch Ratings said in a new outlook on federal highway funding.
"We believe uncertainty about funding will remain and that will add to the pressure for states to explore alternative transportation funding and procurement strategies and lessen their dependence on the federal system," said Scott Zuchorski, senior director of global infrastructure and project finance at Fitch.
President Obama signed the two-month extension of federal transportation funding on May 29, but did so reluctantly, said White House spokesman Josh Earnest.
"It's the president's view that the era of short-term patches must come to an end," Earnest told reporters. "The economic benefits of certainty in terms of our infrastructure investments would benefit the job market and the economy in communities all across the country."
State lawmakers are looking for funding alternatives beyond traditional revenue sources such as sales and gasoline taxes because the certainty of federal funding is fading, Zuchorski said. "An increasing number of states are revisiting their approach to larger capital projects, including considering and in some instances utilizing public-private partnerships," he said.
Keeping the HTF solvent from August to the end of fiscal 2015 on Sept. 30 would require an additional $3 billion of new revenue due to lagging gasoline tax collections, the Congressional Budget Office said late last week. An extension through Dec. 31 would require $8 billion, with another $90 billion needed to fully fund a six-year transportation bill, CBO said.
Transportation project deferrals in seven states total at least $1.63 billion so far this year and another $1.1 billion of projects are at risk, the America Road and Transportation Builders Association said last week. Federal funding accounts for some 52% of state capital transportation budgets, ARTBA said.
"As a result of continued uncertainty about future federal surface transportation funds, 19 states have expressed concerns about the feasibility of future transportation projects," ARTBA said.
States that have delayed road projects include Arkansas, Georgia, Montana, Tennessee, and Wyoming. States considering similar deferrals later this year include Colorado, Michigan, New York, Pennsylvania, Texas, and Virginia, ARTBA said.
"[The two-month extension] keeps our current projects going, but only for 60 days," said Danny Straessle, a spokesman for the Arkansas Department of Highways and Transportation. "In all, the department has suspended 70 projects worth $282 million that were going to bid this year because of the uncertainty over the federal HTF."
The Texas Department of Transportation said a number of its major road and bridge cannot get under way until all their future federal funding is assured with a multiyear bill.
"There are a number of strategic corridor improvements needed across the state in both our rural and metro areas that could be more aggressively advanced with a long-term federal funding bill,' said Texas DOT spokesman Nick Wade.
Texas lawmakers passed a measure in the waning hours of the recently completed 2015 session that, by 2020, could shift almost $3 billion of sales tax collections per year to highways, pending voter approval.
Texas voters will decide in November on a constitutional amendment that, beginning in 2018, would provide up to an additional $2.5 billion per year for Texas roads from general sales tax revenues once total sales tax collections hit $28 billion per year. Collections in fiscal 2014 totaled $27 billion. The proposed amendment also would divert 35% of revenues in excess of $3 billion per year from the state's 6.25% sales tax on vehicles to transportation projects. Vehicle tax revenues dedicated to transportation are expected to start off at $250 million per year in fiscal 2020.
Highway projects are not the only efforts being postponed. Southeastern Pennsylvania Transportation Authority delayed the start of a procurement process for a four-year public transit project until they "see how things transpire in Washington," said Richard Burnfield, chief financial officer and treasurer at SEPTA.
