The Governor's budget proposes a transportation initiative with multiple elements to speed up project delivery and relieve congestion. In this and the following sections, we describe the initiative and provide our assessment of it. Specifically, we conclude that:
The 2000-01 budget includes an initiative--Transportation 2000--designed to relieve congestion by speeding up project delivery. The key elements of the proposal are summarized below in Figure 1. As the figure shows, the Governor's transportation initiative addresses both highways and road transportation as well as public transit. It focuses on getting projects constructed sooner. This is to be achieved mainly by (1) programming more projects into the State Transportation Improvement Program (STIP) and (2) inducing local agencies to use their share of transportation funds more expeditiously via use-it-or-lose-it provisions.
In addition, the initiative provides funding for specific rail track and signal improvements and equipment acquisition for urban and commuter rail as well as intercity rail. The budget also provides funds for planning work to be done for a Bay Area ferry system, in accordance with Chapter 1011, Statutes of 1999 (SB 428, Perata).
With the exception of expenditures for various rail and ferry projects, the initiative contains no new funding for transportation.
In this section, we discuss the following elements of the Governor's transportation initiative.
Our discussion of the proposal relating to rail and ferry funding is in Item 2660, Department of Transportation in this chapter.
California finances its highway and mass transportation programs with a combination of state, federal, local, and private funds. The multiyear expenditure of state and federal funds for transportation capital projects is contained mainly in the STIP, a four-year programming document which is adopted every two years by the California Transportation Commission (CTC). The STIP contains projects that increase the capacity of the state's transportation infrastructure. Typical STIP projects include roadway widening, new interchanges, and high occupancy vehicle lane construction. Another program, the State Highway Operation and Protection Program (SHOPP), includes all major state highway system projects that do not increase capacity, but rather provide traffic safety, roadway and bridge rehabilitation, and operational improvements. Typical SHOPP projects include roadway rehabilitation and bridge repairs.
| Figure 1 |
| Key Provisions of Transportation 2000 Initiative |
| Funding Proposals |
|
|
|
|
| Transportation Programming |
|
| Environmental Streamlining |
|
| Use-It-or-Lose-It Provisions |
|
| Public Transportation |
| Intercity Rail |
|
|
| Urban and Commuter Rail |
|
|
|
| Ferries |
|
State law requires Caltrans to submit a fund estimate to the CTC that projects state and federal revenues and expenditures for highway and rail projects over the forthcoming STIP period. The purpose of the fund estimate is to provide a realistic estimate of the funds available for scheduling projects for delivery in the STIP and the SHOPP.
The 2000 STIP to Be Adopted in July. Chapter 622, Statutes of 1997 (SB 45, Kopp) shortened the STIP period from seven to four years, and provided the 1998 STIP to be a six-year STIP to allow for the transition. As a result, the 2000 STIP is the first four-year STIP covering 2000-01 through 2003-04--the same period as the last four years of the 1998 STIP. Because most of the anticipated revenues for the 2000 STIP period were already programmed in the 1998 STIP, Caltrans initially did not expect to program many additional projects in the 2000 STIP. However, recent legislation, combined with the Governor's initiative and existing reserves, would now provide approximately $4.5 billion in additional programming capacity for the 2000 STIP.
The CTC intends to revise the fund estimate by early March 2000 to reflect the additional programming capacity and provide regions and Caltrans the opportunity to program more projects. The CTC would then adopt the 2000 STIP in July 2000.
The administration proposes to accelerate $3.6 billion worth of projects in the 2000 STIP through a combination of bonds backed by future federal funds and more aggressive cash management of state funds.
The amount for additional programming will reach $4.5 billion when the Governor's proposal is added together with (1) reserves held in the current STIP that are yet unprogrammed, and (2) an advance of funds for project development pursuant to recent legislation.
We think that programming more projects into the STIP would allow project design work to proceed sooner. However, we question whether the state and local agencies can deliver a program that is about 23 percent larger than the program would otherwise have been under current law.
Currently, Caltrans and local agencies are working to deliver $14 billion in transportation projects (including capital outlay support) over the four-year period from 2000-01 through 2003-04. Figure 2 shows the size of the current program, including projects to be delivered by local agencies and STIP and SHOPP projects that are delivered by Caltrans. Absent the Governor's initiative, the program over the next four years would increase to about $15 billion. With the initiative, the 2000 STIP would be expanded substantially to be about $19 billion. This would be an increase of about 31 percent over the current program, and about 23 percent larger than what the 2000 STIP would be under current law.
The STIP Reserves Will Be Programmed. The current STIP contains about $524 million in funds that various counties designated as reserves, and are not yet programmed for specific projects. Regions choose to reserve their share of transportation funds for various reasons, such as to cover unanticipated cost overruns or to set aside funds for a costly project that is not yet fully funded. In the 2000 STIP, it is anticipated that most of the reserves would be programmed for specific projects.
Recent Legislation Advances Funds for Environmental Studies and Design Work. Chapter 783, Statutes of 1999 (AB 1012, Torlakson) added an advance project development element (APDE) to the STIP. Specifically, the APDE gives Caltrans and regions an advance on a portion of future transportation funds for environmental review and design work only. For the 2000 STIP, $375 million will be available for APDE. As authorized by Chapter 783, this amount is equivalent to 25 percent of the amount estimated to be available for project programming in the first two years after the 2000 STIP period (that is, 2004-05 and 2005-06).
| Figure 2 | |
| State Transportation Improvement Program (STIP)
Anticipated Expenditures | |
| 2000-01 Through 2003-04
(In Millions) | |
| 1998 STIP | |
| Local assistance | $3,717 |
| SHOPP, minor projects | 3,428 |
| STIP commitment | 4,674 |
| Capital outlay support | 2,654 |
| Subtotal | $14,473 |
| Reserves to be programmed | $524 |
| Advanced Project Development Element
(Chapter 783, Statutes of 1999 [AB 1012, Torlakson]) |
375 |
| 2000 STIP | $15,372 |
| Governor's initiative | 3,600 |
| Revised 2000 STIP | $18,972 |
Governor's Proposal Will Add $3.6 Billion in Projects. In order to increase project delivery further, the Governor's initiative proposes to accelerate $3.6 billion worth of projects to be delivered in the four years of the 2000 STIP. This would be achieved by:
The GARVEE Bonds Advance Future Federal Funds; Bonds Not Likely to Be Issued for Several Years. The administration proposes to add programming capacity to the 2000 STIP by simply pledging to issue GARVEE bonds in the future. While the administration cannot specify when GARVEE bonds will be issued as a result of the initiative, it indicates that the use of the bonds would be on a relatively short-term basis and would not rely upon federal funds anticipated to be available beyond 2006.
The GARVEE bonds, authorized by Chapter 862, Statutes of 1999 (SB 928, Burton), are used for transportation projects and are backed by future federal funds. It is importation to note that GARVEE bonds do not increase the total amount of federal revenues the state receives. Thus, to the extent that GARVEE bonds are used to finance projects in the 2000 STIP, the state will have less federal funds available for projects in the future because a portion of the future federal revenue stream will be committed to repaying the bonds.
In evaluating GARVEE bonds, the Legislature has to determine whether the benefits of delivering projects in advance outweigh the interest payments and other costs associated with the bonds. Our review shows that given the relatively high cash balance in the SHA and the length of time it takes to deliver transportation projects, it is unlikely that the bonds would be needed for several years (we discuss the condition of the SHA balance in the following section). Additionally, if the STIP period is legislatively extended to seven years, state and federal transportation funds anticipated for the three additional years would be automatically incorporated into the STIP for project programming. This would provide over $3 billion for the extended STIP.
Reducing SHA Cash Balance to Allow More Project Programming. Also, in response to the sizeable SHA cash balance, the initiative proposes to program an additional $600 million for state and local projects in the 2000 STIP. This would be made possible by (1) lowering the amount of SHA cash reserve from $440 million to about $140 million by improving the department's cash management and (2) assuming that various delays in project delivery would free up another $300 million over the four-year STIP period.
Increasing Projects in STIP to Speed Up Project Development Has Merit; Magnitude of Increase Questionable. Accelerating funds available for programming in the STIP would allow the state and local agencies to begin project development work sooner. This would allow improvements to the state's transportation system to be made earlier than otherwise. However, the proposed acceleration of funding is of such a large magnitude that it is questionable whether the projects can be delivered in the 2000 STIP. We discuss in the following sections of this write-up, various constraints that may impede the delivery of these projects.
It is highly unlikely that Caltrans and local agencies will have sufficient planned projects that can be readily programmed into an expanded State Transportation Improvement Program. Waiving the planning process could result in future project cost changes and schedule delays.
Are Projects Ready to Use Additional Programming Capacity? Under current law, a project cannot be programmed into the STIP unless it is fully funded. Additional funds for programming, however, do not by themselves enable new projects to be programmed. This is because, prior to being programmed in the STIP or the SHOPP, projects must have a completed project study report (PSR) which identifies the scope, cost, and schedule of the project. Typically, PSRs for projects on the state highway system are prepared by Caltrans, while PSRs for projects off the state highway system (such as rail or local street and road projects) are prepared by local agencies. Because neither Caltrans nor local agencies could have anticipated this substantial acceleration of funds to be programmed, it is highly unlikely that they will even have close to $3.6 billion of projects with completed PSRs to use all of the programming capacity generated under the Governor's initiative.
Requirement for a PSR Should Not Be Waived to Expedite Programming. One way to expedite projects for programming would be to remove the PSR requirement. We would caution against this, except for the most simple rehabilitation projects. Although the lack of a PSR does prevent a project from being programmed into the STIP and project development work to commence, PSRs play an important role in timely project delivery. It is in the PSR stage, for instance, that the purpose and need for the project, as well as project alternatives, are defined. To the extent that this is done carefully, giving consideration to such matters as community support for the project, a project's cost and schedule can be estimated with greater accuracy. By contrast, failure to give adequate consideration to such factors could cause substantial delay at a later date due to failure to anticipate concerns likely to be raised during the environmental review.
Depending on the mix of projects that would be programmed in the 2000 State Transportation Improvement Program (STIP), Caltrans would have to expand its capital outlay support staff significantly--ranging from an additional 4,000 personnel-years to over 8,000 personnel-years mainly in the next two years (at a total cost of $400 million to over $800 million)--if the projects are to be delivered in the 2000 STIP period.
Beyond the question of whether projects are ready to be programmed is an even more critical question--whether Caltrans or local agencies have the ability to hire and train staff to perform the necessary design and project development work to deliver an additional $3.6 billion worth of projects in the next four years.
Caltrans Will Need Significant Staff Increase. As Figure 2 shows, Caltrans and local agencies are currently working to deliver almost $12 billion worth of STIP, SHOPP, and local projects between 2000-01 and 2003-04 (1998 STIP). To deliver this work, Caltrans estimates that it would cost about $2.7 billion in state staff support in the next four years, in addition to local staff support. In 1999-00, Caltrans has a staff of 10,992 personnel-years to do project development work on STIP and SHOPP projects, at an estimated cost of about $980 million. An additional $30 million is estimated to be spent to provide assistance to local agencies to deliver their projects.
Our review shows that Caltrans and local agencies will need to expand their staff significantly in order to develop an additional $3.6 billion worth of projects. The number of additional staff Caltrans will need would depend on the mix of highway and off-highway projects programmed. The larger the proportion of projects on the state highway system, the larger will be Caltrans' staffing need. Using Caltrans' methodology in estimating capital outlay staffing level, we estimate that Caltrans could need an increase of between 4,000 to over 8,000 personnel-years of staff over the next four years to handle the additional workload, at a rough cost estimate of between $400 million to over $800 million. Most of the increase would be concentrated in the next two years if projects are anticipated to be ready for delivery in 2003-04.
Can Staff Be Hired and Trained in Time to Deliver Projects on Schedule? Caltrans capital outlay staff have undergone significant expansion in the last two years, mainly as a result of significant increases in federal transportation funding under the Transportation Equity Act for the 21st Century. Currently, Caltrans is having difficulty hiring and retaining staff to meet its workload. Specifically, the department now has a 9 percent vacancy rate in its project development and engineering staff, and a 30 percent vacancy rate in its local assistance staff who play a key role in guiding local agencies through projects funded with federal funds. (Please see further discussion on vacancies and project delivery in Item 2660, Department of Transportation.)
The relatively high vacancy rates raise doubt as to whether Caltrans can hire sufficient staff readily to meet the challenge of delivering a significantly larger STIP. The budget anticipates revising Caltrans' staffing request in May, after the department and CTC have a better assessment as to the number and types of projects that would be scheduled for delivery in the 2000 STIP. We recommend that the Legislature consider the above issues when evaluating the department's staffing request to meet the additional workload.
Certain transportation projects, particularly system management projects that focus on managing highway congestion, could relieve some congestion in the short term.
An important objective of the initiative is to relieve congestion on highways and roads. Even if the department is able to hire and train sufficient staff, however,
meeting the objective of congestion relief partly depends on the types of projects chosen for programming by Caltrans and local agencies. To the extent that
major transportation capital outlay projects are selected or programmed, such projects would typically not be completed for five to ten years, and would,
therefore, provide no short-term relief. On the other hand, system management projects, which focus on managing highway congestion, may be capable of
providing congestion relief sooner. Examples of system management projects include
(1) controlling entry to the freeway system by ramp meters; (2) alerting motorists of accidents and recommending alternative routes via electronic message
signs; and (3) monitoring and managing traffic congestion created by construction zones, special events, or emergencies.
At the time this analysis was prepared, Caltrans and regional agencies had not yet submitted their suggested projects to be programmed. Until this occurs, the Legislature cannot gauge the initiative's potential for relieving congestion in the near term.
The initiative proposes to streamline the environmental review process, but fails to provide any details as to how this will be done. The impact on project delivery cannot be assessed.
The Governor's initiative also calls for streamlining the environmental review process to facilitate more speedy delivery of transportation projects. However, the budget provides no specifics or details as to how streamlining would be achieved. The Governor's budget only directs "the Business, Transportation and Housing Agency, the California Environmental Protection Agency, and the Resources Agency to streamline California's transportation project delivery while maintaining environmental protection standards."
The lack of specifics makes it impossible for the Legislature to assess what impact this aspect of the initiative would have on project delivery. In our discussions on project delivery and environmental streamlining (in Item 2660, Department of Transportation), we recommend a number of administrative as well as legislative changes that could be adopted to improve the environmental review process and expedite project delivery.
The Governor's initiative proposes to extend the State Transportation Improvement Program period from four to seven years. This proposal has merit and would allow more projects to be developed sooner.
The initiative proposes extending the STIP time frame from four years to seven years. This would revert the length of the STIP to what it was prior to the enactment of Chapter 622. One rationale for reducing the length of the STIP was a concern that a seven-year STIP resulted in inaccurate project cost and schedule estimates because of the difficulty of making long-term projections. In addition, a longer STIP was associated with project delays caused by changes in project scope to reflect changes in traffic conditions over time.
While these are legitimate concerns, we believe that these problems are less a result of the length of the STIP itself, and more a consequence of the length of time it takes to deliver most transportation projects. Because it often takes a long time for projects to be developed, we think a longer STIP period has merit because it provides a longer planning horizon, thereby allowing Caltrans and local agencies to begin work on complex projects that typically take over four years to deliver.
The initiative proposes to apply a use-it-or-lose-it provision to the local share of federal transportation funds. Given the recent enactment of legislation intended to promote the timely use of funds by local agencies and local agencies' recent improvement in their expenditure of federal funds, further strengthening of these provisions is not warranted at this time.
The initiative also proposes a use-it-or-lose-it provision to apply to local gas tax reserves. Given the growing backlog of deferred maintenance for local streets and roads, as well as the possibility that some of these funds are obligated, we recommend that this proposal not be adopted.
The initiative contains two provisions to encourage local transportation agencies to spend their transportation funds more expeditiously. Both of these provisions would require legislation. To the extent that local agencies do not meet the deadlines set in legislation, more funds would be available for STIP programming.
Use-It-or-Lose-It Provision on Local Share of Federal Funds Not Warranted at This Time. The initiative proposes to apply a use-it-or-lose-it provision to $800 million of local agencies' federal funds. These monies are the Congestion Mitigation and Air Quality (CMAQ) funds and the Regional Surface Transportation Program (RSTP) funds. The CMAQ funds are provided to urban areas that do not meet federal clean air standards. These funds must be used on projects that reduce congestion and air pollution. The RSTP funds, on the other hand, are more flexible and can be used for roadway or transit rehabilitation as well as highway construction. Local agencies currently have a total of about $860 million in unused CMAQ and RSTP funds.
Chapter 783, already contains provisions to expedite the use of these funds. Specifically, under Chapter 783, local agencies must obligate approximately $360 million of the unexpended amount by September 30, 2000, otherwise the CTC may reprogram the amount for other projects. Under current law, neither Caltrans nor CTC has the authority to reprogram the remaining $500 million which will not be subject to the Chapter 783 provision for several years. At the time this analysis was prepared, it was not clear how the initiative would strengthen the existing timely use of funds provisions in statute. For instance, it is not clear whether it would apply a use-it-or-lose-it provision to the remaining $500 million in the current year, or alternatively, further shorten the time within which local agencies have to obligate their share of federal funds.
It is worth noting that local agencies have improved their expenditure of federal funds in the last year. Specifically, they expended 57 percent of their share of federal funds in 1998-99 compared to 40 percent in prior years. Given this improvement, the timely use of funds provisions in Chapter 783, and the recent doubling of Caltrans staff to assist local agencies with federally funded projects, we find that applying a stronger use-it-or-lose-it provision to local expenditure of federal funds is not warranted at this time.
Use-It-Or-Lose-It Provision for Local Gas Tax Revenues Should Not Be Adopted. Under current law, local governments receive about 34 percent of state gas tax revenues (at 18 cents per gallon of gasoline and diesel fuel). Local agencies use these monies to improve local streets and roads, and the state currently has no role in selecting the projects. The initiative proposes to reprogram $300 million of these gas tax monies held in reserve by local agencies, unless they show substantive progress in programming these funds by July 31, 2000. The proposal indicates that local agencies are holding more than $1.7 billion of local transportation funds in reserves. Of that amount, about $450 million are local gas tax revenues. The proposal does not explain what local agencies would be required to do by this date to demonstrate progress.
The $450 million represents the cumulative amount of unspent gas tax revenues held by all the counties and cities statewide at a specific point in time. According to local agencies, some of these funds are not reserves at all, but rather funds that have been obligated to specific projects, but have yet to be paid out. Furthermore, our review indicates that local agencies have a strong record of spending these funds in a timely manner. Statewide, local agencies have generally spent over 97 percent of their gas tax revenues annually. Finally, it is worth noting that the CTC's inventory of ten-year transportation funding needs, (prepared pursuant to SR 8 [Burton]) found that local agencies have an estimated $10.5 billion backlog in local streets and roads needs, currently growing at an annual rate of $400 million. To the extent that the initiative proposes to reprogram local gas tax funds for highways or transit, but not local streets and roads projects, this backlog would grow even larger. In view of these concerns, we recommend this proposal not be adopted.