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A new law reforms and modernizes how major road projects are prioritized and funded in North Carolina. The Strategic Transportation Investments Act, sponsored by Representative Bill Brawley of Mecklenburg County, will govern the use of state and federal funds for state transportation construction and capital needs. (Click here for an informative interview of Representative Brawley with Legislative Week in Review’s Kelly McCullen about the landmark Transportation legislation.)
The old distribution formula, which dates back to 1989, relies heavily on clout, favoritism and political patronage to determine which roads, bridges, and highways get built — and it’s been more a function of politics than of any real demonstrable need. For years, areas with powerful members of the General Assembly have benefitted from new transportation infrastructure while other areas of the state have languished.
“We’re not taking money away from rural areas…what we are doing is connecting rural areas to urban areas in a way that benefits everybody.” — Representative Bill Brawley
The new law changes that dynamic by prioritizing each new project based on its objective economic development value, removing politics from the process. “Businesses want to invest where states have their act together and where they have a strategy and a long-term vision, and that is exactly what we have done,” said Governor Pat McCrory.
The North Carolina Department of Transportation (DOT) presented the Governor with a set of statistical projections that ultimately required the legislature to make substantial reforms in infrastructure investment for the long term and the Strategic Transportation Investments Act is their response to this challenge.
The new law sets out a vision that addresses emerging economic and cultural realities, provides a model for reaching solutions, and moves the whole of North Carolina to a more sustainable path. The reforms include careful consideration of economic development, the impact on job creation, public and private funding mixes, changing construction needs, and the use of data-driven metrics and local input for planning and setting priorities.
According the the DOT, the ten year plan estimates funding for 260 projects which will create 240,000 jobs over that period and will become effective starting in July 2015.
Strategic Mobility Formula
The new funding formula divides the Department of Transportation’s budget into three classifications for distributing available revenue: State, Region, and Division:
- State: 40% ($6 billion over 10 years) will go to statewide Statewide Mobility projects that include interstate highways, major U.S. and N.C. highways, Strategic Defense highways, airports with international passenger service or large numbers of passengers, and key freight service rail lines. This category of projects will be entirely data-driven, meaning decisions will be based on things like traffic volume, crash statistics, economic competitiveness and freight movement. However, local officials will have the opportunity to submit candidate projects for consideration and to share in their funding.
- Region: 30% ($4.5 billion over 10 years) will go to regional impact projects. Each of the six regions consist of two comparable adjoining Transportation Divisions. The regional category will allow local officials to provide their input on intrastate and regional projects, and since regional needs vary from one area of the state to another, there is flexibility to allow urban areas to address urban needs and rural areas to address rural needs.
- Division: 30% ($4.5 billion over 10 years) will be distributed equally to the state’s 14 Transportation Divisions for projects that address local concerns, such as safety, congestion and connectivity. The division category will allow local officials to provide at least 50 percent of the project score, which will allow them to greatly influence which projects get funded in their areas.
“The Strategic Mobility Formula will allow us to use our existing resources more efficiently and effectively and help us move forward more quickly with important projects that will enhance mobility and revitalize communities. It will benefit metro areas that need projects focused on easing congestion and enhancing safety, while allowing small towns to invest in projects that help improve access to medical services, economic centers, education and recreation.” — Department of Transportation
The law requires DOT to submit reports to the General Assembly on its recommended formulas for ranking projects in the new Strategic Prioritization Plan on August 15, 2013, October 1, 2013, and January 1, 2014. And the DOT must also submit reports to the General Assembly on its transition to the new Strategic Prioritization Plan on March 1, 2014, and November 1, 2014.
Secondary Road Construction
The transportation investment strategy phases out the Highway Fund secondary road construction program:
- It defunds the current program by repealing a requirement that $15 of each vehicle title application fee deposited in the Highway Trust Fund be used for secondary road paving;
- It extends the program for a year to July 2014, when it will be formally ended; Will limit the secondary road program in the Highway Fund to maintenance and improvement only and not construction; and
- It creates a secondary road unpaved road paving program in the Highway Fund, distributed based on a DOT Statewide prioritization.
State Street Aid Program
The transportation investment strategy makes the Highway Fund is the sole source of funds for the State Street Aid Program, known as the Powell Bill.
Powell Bill funds are allocated every year by the state to eligible cities for the the building and maintenance of major city streets that are not part of the state highway system. These funds can be used for maintaining, repairing, constructing, reconstructing or widening of local streets that are the responsibility of the municipalities, or for bikeways or sidewalks along public streets and highways. According to the American Association of State Highway and Transportation Officials, in 2012, NCDOT is distributed $142.8 million to 508 separate municipalities.
HB817 changes the Powell Bill funding formula from 1¾ cents per gallon of the motor fuels tax to 10.4% of the net amount produced during the fiscal year. The Powell Bill supplement from the Highway Trust Fund will be discontinued; however, the appropriation to provide state-aid for municipal streets will continue as it currently exists. The amounts going to local municipalities will be held harmless, or indemnified, under the new initiative compared to the existing funding.
HB817 expands the uses for Powell Bill funds to include the planning, construction and maintenance of greenways and bikeways, and for their use as a match for federal funding for bicycle and pedestrian improvement projects, as well as for streets, sidewalks, greenways, bikeways, or transportation improvement projects (TIP) within municipal limits.
The transportation investment strategy modifies the authorized Turnpike Authority project list. The new law amends the Turnpike Authority’s authorized projects list to authorize nine projects. Four of the projects are in existing law: portions of the Triangle Expressway (constituting 3 segment projects) and the Monroe Bypass. Any additional project proposal by the Authority would require prior consultation with the Joint Legislative Commission on Governmental Operations.
The five remaining authorized projects must meet the following conditions: two must be DOT-ranked “top 35” projects, and either may be subject to a partnership agreement. Of the others, one may be subject to a partnership agreement. All five must be included in the local transportation plan, in the current State TIP, and toll projects must also be approved by the affected MPO and RPO.
The transportation investment strategy authorizes up to three partnership agreements with private entities for DOT or Turnpike Authority projects, subject to provisions for the following:
- Revenue sharing, excess revenue;
- An agreement time limit of 50 years from the beginning of toll operations;
- Reporting to the General Assembly prior to entering into an agreement;
- Public hearings on applicable toll rates.
The law also authorizes the Turnpike Authority to designate optional high-occupancy toll lanes and it amends the powers of the Authority to authorize them to use revenues derived from Turnpike Projects for:
- design, reconstruction, rehabilitation, and replacement;
- debt service, financing costs, return on investment,
- other authorized uses under a partnership agreement;
- for private activity bonds, and federal or State loans.
The law authorizes the Turnpike Authority to designate high-occupancy toll (HOT) lanes.
Frequently Asked Questions
Why is this new formula being implemented?
Over the next 10 years, North Carolina expects a population increase of more than 1.3 million, greatly increasing the infrastructure need. During that same period, the state faces a projected $1.7 billion decrease in funding. The resulting infrastructure gap necessitates more efficient investment of available resources. The previous formula for funding transportation improvements was developed in 1989 and needed to be updated to adapt to the changes that have occurred in the state since that time. The old system could lead to under-investing in some areas and investing in other areas that don’t produce results. We lack alignment with commerce in economic development activity and the policy structures to prioritize our investments. This formula will better allow data-driven decisions about which project priorities advance.
What will this formula do for me?
The Strategic Mobility Formula connects and invests in people. It allows us to maximize the benefits derived from our transportation investments. It uses infrastructure to promote economic development. It focuses on connecting people to products, services and education and helps grow and create new economic centers. It will transform communities because it focuses on improving drive times between places of residence and employment centers.
How is this formula different from previous funding formulas?
The previous formulas, for the most part, began in 1989 when economic conditions and needs of North Carolinians were different than today. The program was largely designed to develop a legislatively mandated set of projects. While many of those projects were excellent, the point has been reached where those goals need to be revisited in light of today’s challenges, which include expanding population, high unemployment rates, increased traffic and worsening congestion. This initiative will redirect how we fund, distribute and prioritize our projects to meet these challenges.
When will this become effective? What about projects already in the pipeline?
The new formula is scheduled to be fully implemented by July 1, 2015. Projects funded for construction before then will proceed as scheduled; projects slated for after that time will be ranked and programmed according to the new formula.
Why is the equity formula being eliminated?
The 1989 Distribution Formula or equity formula will be repealed because this new initiative will distribute funds on a needs basis. Under the new formula, the best scoring projects will be funded rather than letting the funding drive the selection of projects as sometimes happened under the equity formula. Specific distributions to each region within the regional category will be based on population while distributions within the division category will be equal share.