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From Tech Transfer Newsletter, Fall 2006
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Implications of SAFETEA-LU for California:
Good News and Bad News as Rules Change
By Elizabeth G. Hill, California Legislative Analyst's Office
The federal transportation act (SAFETEA-LU), enacted in August 2005, provides an increase in funding for highways, transit, and transportation safety, and presents opportunities for financing transportation through nontraditional funding sources and expediting project delivery.
Overall Funding to State Increases
California's apportionment of federal transportation funds under SAFETEA-LU will be substantially higher than under TEA-21. This is because of both the increase in the nationwide funding authorization and the higher rate of return to donor states on fuel tax contributions. Of the $23.4 billion allocated to California through 2009, about $18 billion will go to highways, $5 billion will go to transit, and $452 million will go to safety improvements. This represents a 40 percent increase in average annual funding.
Highway Grant Programs
Funding for highways accounts for 76 percent of all funding allocated to California under SAFETEA-LU, with six major formula grant programs comprising the majority of highway funding ($15 billion). Those programs are: Interstate Maintenance, National Highway System, Surface Transportation (STP), Bridges, Congestion Mitigation/Air Quality Improvement (CMAQ), and Equity Bonus.
Safety Grant Programs
While SAFETEA-LU creates and expands safety grant programs, these programs actually account for a relatively small portion of the total funding authorization to the state. The majority of the state's safety funds will come from the Highway Safety Improvement Program (HSIP), which provides $384 million for statewide safety-related data collection, infrastructure improvement, and administration of safety programs including pots specifically designated for use to improve safety at rail crossings and rural roads. The federal Safe Routes to School Program (SRTS) will provide a total of $68 million for safety improvements on the transportation network serving schools.
High Level of Earmarks a Mixed Blessing
$3.7 billion (16 percent) of California's $23.4 billion authorization is earmarked for specific projects. This more than quadruples the amount of earmarked funds received by the state under the previous transportation bill. While earmarked funds infuse the state with federal dollars, these grants are not as flexible as funds apportioned by formula. Specifically, the state has little discretion to redirect earmarked funds to other projects that it may deem to have higher priority. About 60 percent of California's earmarked funds are devoted to specified projects and cannot be transferred to other priorities.
Even in the other 40 percent of cases where earmarked funds can be used for other projects, the act sets limits on the extent of transfers. Specifically, transfers can only be for projects funded by the same discretionary grant program. Additionally, there is a limit on the amount of earmarked funding that may be devoted to any given project. As a result of these two conditions, the state's flexibility to transfer earmarked funds is quite limited.
In addition, earmarked amounts typically do not cover the full costs of projects. As such, state and local agencies must dedicate substantial additional funding from other sources to fully cover project costs. Moreover, if an earmarked project is not a state priority, dedicating other funding to fully pay for the project would further limit the state's ability to meet higher funding priorities.
New Program Funding Benefits Goods Movement
The act establishes several new programs (including the Projects of National and Regional Significance (PNRS) and National Corridor Infrastructure Improvement Program (NCIIP) programs), which target funding to projects that benefit national and international commerce. In addition, SAFETEA-LU allocates $106 million in coordinated Border Infrastructure (CBI) program funds to California. These funds are intended to provide additional support to mobility improvement projects within 100 miles of the California-Mexico border (San Diego, Imperial, and parts of Orange and Riverside Counties).
Toll Road Project Opportunities Expanded
The act provides expanded opportunities to charge tolls on interstate highways. In particular, SAFETEA-LU establishes the Express Lanes Demonstration program, which allows the creation of 15 new toll projects nationwide on existing high occupancy vehicle (HOV) lanes and any highway lane opened after SAFETEA-LU's enactment. Once toll revenues cover facility construction and maintenance costs, states may use revenues for other transportation purposes. The program requires that newly tolled HOV lanes include variable pricing structures (tolls that vary by time of day or congestion level), and that all toll lanes utilize automatic toll collection technologies, such as FasTrak.
Relaxes Design-Build Restrictions, but State Law Requires Design-Bid-Build
The new federal act eliminates the $50 million floor on the cost of projects that can be constructed using the design-build method, a delivery process that awards both the design and construction of a project to a single entity. The use of design-build to construct public projects is a relatively recent development aimed at reducing project delivery times by streamlining the design and construction processes. Most public agencies in the state have little experience using this delivery process. The new act makes virtually any project eligible to be built using design-build contracting.
With a few exemptions, state law however requires public agencies to use the design-bid-build process to deliver capital projects. Under this process, public agencies typically complete the project design before advertising and awarding the construction contract through competitive bidding. Caltrans is not currently authorized to utilize the design-build method.
About this article
This article contains portions of a longer, more complete analysis of SAFETEA-LU that was prepared by the Legislative Analyst's Office (LAO). The LAO is a nonpartisan office that provides fiscal and policy information and advice to the state Legislature.
SAFETEA-LU provides many additional changes that impact public agencies. Other important elements of SAFETEA-LU include an air quality conformity status reclassification for several counties that affects the state's options for distributing CMAQ funds, an increase in funds for new and existing highway safety programs that might be subject to implementation hurdles, expanded innovative finance options, environmental streamlining opportunities that could cause additional costs and potential liability, and authorization for single occupant hybrids to use HOV lanes. These topics are discussed in the full text.
Additionally, the full report includes an overview of major provisions of SAFETEA-LU nationwide and a discussion of issues for the legislature to consider.
The full text of this report, Funding for Transportation: What the New Federal Act Means for California, is available at http://www.lao.ca.gov/PubDetails.aspx?id=1365.
For detailed information about SAFETEA-LU, visit www.fhwa.dot.ca.gov/safetealu.
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