Scaled-Back Construction

The Missouri Highways and Transportation Commission last week approved a $5.8 billion, five-year construction program that officials warned will be limited to maintenance and safety work beginning late next year.

The program includes $300 million for new construction projects, spending that is permitted because the MHTC was able to generate some additional room to borrow in part because of lower than expected interest rates.

About $140 million will be funded from borrowing, while the remainder will come from local matching funds and savings expected from using a new design process for the projects that include adding new lanes, interchange improvements, and congestion relief.

“Even though it’s great news to be able to pursue this additional work, we can’t overlook that in this program, the Amendment 3 bond proceeds are used up, and our state transportation program goes back to critically low spending levels,” Missouri Department of Transportation director Pete Rahn said in a statement. “The program that’s been approved marks the shift from having the opportunity to build new projects to barely maintaining what we have.”

Without new funding, the state will transition from a construction program averaging $1.23 billion to a construction program of about $575 million in 2013. Declining federal aid and rising fuel and construction costs are also hurting MDOT’s ability to fund new projects.

“We have seen great progress due to Amendment 3,” Rahn said. “Missouri must now have a conversation about what is to come regarding continued improvements to our transportation system.”

The bulk of the spending for the five-year program — nearly $4.4 billion — will finance 700 highway and bridge improvement projects. Another $800 million is funding other transportation-related projects and $640 million goes towards local projects. The program is expected to provide 9,000 construction jobs a year and adds almost $900 million to the state economy.

The commission began a new legislatively approved borrowing program in 2000. It expanded the program after voters in November 2004 approved a constitutional amendment, Amendment 3, to accelerate state road projects by ending the diversion of some road-related taxes to the general fund.

The MHTC issued more than $350 million of first- and third-lien bonds under the new borrowing capacity in 2005. It had an $800 million sale in 2006 under the first lien. The commission sold $550 million of second-lien bonds last year.

MDOT is currently working on two major funding plans. Officials are planning to sell later this year their first Garvee deal, for about $150 million. The grant anticipation revenue vehicle bond issue would finance the reconstruction of Interstate 64 in St. Louis. The department is also working on an innovative $700 million private-activity financing to fund the reconstruction of 800 bridges under a federal pilot program.

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