Shortage of Funds to Delay Highway Projects in State

For the first time in 15 years, state administrators have advised the California Transportation Commission that a shortage of highway funds will force them to begin a policy of intentionally delaying construction projects.

In an internal memorandum from Transportation Department Director Robert K. Best, the commission was told to expect the first “slowdown” to come in July and then be followed by increasingly longer delays.

After the July hiatus, the memo showed, the department would advertise projects for bid in August and September and then shut down again in October and November. By February, 1990, the memo said, all federal funds for that fiscal year will have been spent and new projects will have to be delayed five months until the following August.

“These are kind of like the foreshocks to the earthquake,” said Allan Hendrix, chief of the department’s division of highways and programming.

Department officials had warned for months that the five-year, $14-billion State Transportation Improvement Program faced at least a $3.5-billion deficit because gasoline tax and other highway user fees have not kept pace with inflation and demands for new construction. Legislative analysts later estimated the deficit at $4.7 billion.

Department officials had advised lawmakers that at some point they would have to begin juggling funds and delaying projects. The memo now provides the first firm indication of exactly when the department expects the delays to come and how long it expects each will last.

“For the past several months, the department has identified for the commission an approaching slowdown in state highway construction, as our delivery of projects ready for advertising outpaces the availability of funds for these projects,” Best wrote the commission. “ . . . During the current federal fiscal year, we will deliver about $600 million of projects that exceed available funding.”

Best said the first delay might have come as soon as this month but officials were able to stave it off until July by “careful management of federal funds.”

“The department is attempting to stretch its money,” said Assemblyman Richard Katz (D-Sylmar), chairman of the Assembly Transportation Committee. “At some point they are going to have to start laying off personnel and then gearing up again. We have been building up the department based on an expectation of funds and at some point you, don’t need everybody.”

Officials said it is too soon to name the specific projects that will be delayed.

A department spokesman said some grading and paving work involved in the construction of the Century Freeway could be subject to a short delay, but he expects that contractors will be able to catch up quickly so the freeway could open on schedule in 1993. The 17.3-mile Century Freeway, constructed at a cost of $2 billion, will link the city of Norwalk with Los Angeles International Airport.

Hendrix said the money problems began in the mid-1980s with the passage of federal legislation and administrative rules that reduced the amount of federal money that was being poured into California for highway construction. He said state officials did not make a corresponding cutback in their planning for construction projects because they expected the federal losses to be made up by state funds.

The federal government provides 80% of the financing for most highway construction projects, with the states expected to pay the remaining 20%.

When there was suddenly a shortage of state funds, Hendrix said, officials were forced to begin delaying projects. He said the first delay will come in July because federal funds for highway construction will be depleted in June. He said the department will be able to advertise projects for bid in August and September by, in effect, borrowing on anticipated federal funds which will become available in October.

By October, he said the new funds will have been spent and the department will not be able to begin advertising again until December. At that point, he said, it can borrow against federal funds that will become available in January, 1990. He said it expects those funds to be depleted by February. More will not be available, he said, until the following August.

Although actual construction will be delayed, Hendrix said, engineering and designing will continue as if there is no shortage of funds.

The last time the state intentionally ordered a slowdown on highway construction was in 1974, when state gas tax revenues “nose dived” as a result of the Arab oil embargo, Hendrix added.

The plan for delaying projects came as lawmakers and private groups involved in transportation were preparing to meet with Gov. George Deukmejian in the next few weeks in a final effort to reach a compromise on the highway-financing issue. At two previous transportation “summits,” Deukmejian, lawmakers and business and labor leaders agreed that an additional $20 billion will need to be pumped into the state’s transportation system in the next decade to erase the deficit and to relieve traffic congestion.

Two members of Californians for Better Transportation, a nonprofit group composed of business, labor and local government groups involved in transportation, said Wednesday they fear that the governor may push for a compromise that would provide only a portion of the $20 billion.

David Ackerman, legislative representative of the Associated General Contractors of California, said Deukmejian had agreed that $20 billion will be needed but insisted at the same time that any gas tax increase should be subject to voter approval. To raise $20 billion, he said, a substantial gas tax increase--probably as much as 10 or 12 cents per gallon--would be needed, and polls show that the voters would never approve such a hike.

In private meetings, Ackerman said, officials in the Deukmejian Adminstration had broached the possibility of a 5-cent gas tax increase, which some polls show could win voter approval.

Jack Maltester, president of Californians for Better Transportation, said his group, which is heavily represented at the summit meeting, could not agree to such a plan because it would provide little more than enough money to ease the deficit.

“There actually is a feeling of discouragement on the part of (Californians for Better Transportation) that really the summit is not producing anything,” he said. “ . . . If nothing comes out of the summit we’re pretty well convinced nothing is going to happen during this Administration.”

But Kevin Brett, a spokesman for the governor, said Deukmejian is not wedded to any specific plan, although he remains firm in his contention that any proposed gas tax increase must be submitted to the voters.

“We remain confident that a consensus can be reached,” he said. “ . . . The process is right on schedule. We are pleased with the momentum so far but we go into this next meeting with our eyes fully open because we know the difficult issues still remain. This is not a simple subject.”