NCDOT Report: Highway Crash

For Now, Stimulus Saves the Day for State’s Transportation Contractors

By Debra Wood

The American Recovery and Reinvestment Act came along just as traditional revenues for new roadwork were drying up in North Carolina and road lettings were being reduced to a small fraction of recent levels.

The North Carolina Department of Transportation has between only $15 million and $20 million available monthly for traditional lettings. That’s down 75% from 2008, when the state let $948.6 million in new contracts, or an average of nearly $80 million per month.

Revenues are down about 11% overall, but the highway-use tax, derived from vehicle sales, is down about 30% this year, says Burt Tasaico, state program analysis engineer for NCDOT, adding that the highway use tax primarily funds the highway trust fund account, which is used to pay for capital projects in the state’s transportation improvement program. 

“We have to ensure the monies will be there in the future to meet and pay contractors for the work that they have just performed,” Tascaico says. “It’s a balancing act between meeting the obligations that we know into the future and being able to obligate more and still meet our financial responsibilities.”

North Carolina’s long-term funding shortage is in the billions, Tasaico says. Resolving the funding problems will require additional revenue sources, such as increases to the fuel and highway taxes or other user fees associated with driver licenses or titles.

“It has a lot of implications, not only internal but external to the department,” Tasaico says. “It impacts every citizen on a day-to-day basis.”

Thanks to the stimulus, “We’re beginning to be a bit more optimistic,” says Berry Jenkins, North Carolina Heavy-Highway Division director for Carolinas Associated General Contractors in Raleigh.

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The state will receive $838 million in federal funding, with $735 million designated for highway and bridge improvements and $103 million for aviation, transit and other modes of transportation. States must obligate half of the dollars within 120 days, and all of the money must be committed within one year. The federal government will give priority to projects that can be completed within three years and are located in economically distressed areas.

“North Carolina is trying to focus the projects on ones where North Carolina suppliers for materials can be utilized,” Jenkins says.

By June, NCDOT plans to let $466 million of the stimulus money to fund about 70 projects, the majority of which had been delayed or deferred due to funding constraints. The department considered more than $5 billion in potential highway projects, evaluating them for their ability to create and sustain jobs for a wide variety of industry partners throughout the state.

State transportation officials estimate this round of infrastructure improvements will create or retain about 14,000 jobs.

NCDOT has experienced an up-and-down work program over the past few years. For example, the department let $948.6 million in 2008, $1 billion in 2007, $666.8 million in 2006, $475 million in 2005, $1.3 billion in 2004 and $1.2 billion in 2003, according to department records.

In 2007, Steve Varnedoe, chief engineer for NCDOT, began using Grant Anticipation Revenue Vehicles or “GARVEE” bonds to finance jobs. Jenkins says GARVEE bonds have not created a problem for the agency, as it has used them judiciously to build large projects.

Currently federal revenue is holding at the same level or is a little higher than last year, says Laurie Smith, in the funds administration section of the NCDOT.

“We’re borrowing future dollars to hedge inflation,” Tasaico says. “We’re able to get the North Carolina motorist on the road, using the facilities, years ahead of schedule.”

However, in early 2009, Jenkins says, contractors were expressing some concern about NCDOT’s ability to pay on current project, especially a couple of design-build jobs that were ahead of schedule.

“Now, to the best we can learn, current projects being paid is not a problem,” Jenkins says. “And we don’t anticipate it is a problem.”

Traditional Lettings

Without the stimulus money, activity would have slowed to a crawl this year. Jenkins says that revenues from gas tax and a highway-use tax, derived from vehicle sales, are roughly 30% to 35% below normal, which he attributes to changes in driving habits and a decline in vehicle sales.

Within the March-to-June lettings, NCDOT plans to award $96.5 in traditional lettings and $143.7 million in GARVEE bonded projects. The state expects to let $706 million in new work by June.

(Photo courtesy Flatiron Constructors)

While many of the projects on the entire list from all funding sources are small, plans include $64.3 million for grading and structures for multiple lanes on Crescent Road in Lenoir County, expected to let in June, and $63.4 million to extend Interstate 295, the Fayetteville Outer Loop, in Cumberland County, expected to let in May.

Jenkins says he and his members are not concerned where the money comes from to build projects, as long as more work is available.

The North Carolina Turnpike Authority was created in 2002 by the state’s General Assembly. It hopes to start its first project, the 18.8-mi, design-build Triangle Expressway, a toll road in the Raleigh-Durham area, this year. It includes the estimated $783.7 million Western Wake Freeway and the $183.8 million Triangle Parkway.

Southeast Construction reported last year that the turnpike authority would issue notices to award to Raleigh-Durham Roadbuilders, a joint venture of Archer Western Contractors of Atlanta and Granite Construction Co. of Tampa, for the design-build construction of the Western Wake Freeway in Wake County and to S.T. Wooten Design-Build Team of Wilson, N.C., for the Triangle Parkway.

The turnpike authority was delayed in selling bonds to finance the work because of the turmoil in the credit markets, says Beau Memory, spokesperson for the agency in an email response to questions. He adds the agency now hopes to sell these bonds in May.

“They have asked the teams that have the lowest bids to hold their bids until June or July to give them a chance to get this worked out,” Jenkins says. “The economy is so severe, you don’t want to let go of something that could potentially be a project for you.”

Continuing Work

Although lettings have been down, the state let several large projects in 2008. They include a $99.7 million design-build contract to Barnhill Contracting Co. of Tarboro, N.C., for the 6.8-mi, 10-bridge U.S. Route 311 High Point Bypass in Randolph County; a $65.5 million contract to Barnhill for the U.S. Route 70 Goldsboro Bypass in Wayne County; and a $107.8 million contract to Taylor Murphy Construction Co. of Asheville, N.C., and Young & McQueen Grading Co. of Burnsville, N.C., for improvements to U.S. Route 19 in Madison and Yancey counties.

Also in the western portion of the state, Wright Bros. Construction of Charleston, Tenn., is working on a $54 million, design-build interchange project on NC 146 at Interstate 26, near Asheville.

Design on the NC 146 project began in April 2007 and construction in 2008. It is scheduled to finish in October 2010. It was 48% complete in March, slightly behind schedule.

In Midstate counties Guilford and Randolph, Blythe Construction Co. of Charlotte is ahead of schedule and more than 61% complete on a $104 million grading, drainage, paving and structure contract on U.S. Route 311. The 6.3-mi project—which includes a new interchange at Interstate 85, and 15 new bridges, among other work—began in May 2007 and is scheduled for completion in May 2011.

A joint venture of Flatiron Constructors of Longmont, Colo., and United Contractors of Chester, S.C., also is tracking ahead of schedule on its $192 million, design-build U.S. 17 Washington Bypass project in eastern North Carolina. Work began in 2006 and includes construction of a 2.8-mi-long bridge across the Tar River, Kennedy Creek and assorted wetlands; three land bridges; and 4 mi of highway. The job was 78% complete in March and should wrap up by November 2010.

More Stimulus

The state has prepared a list of 21 potential rail projects, totaling $981 million, and 180 potential public transportation projects totaling $384 million. NCDOT will evaluate those projects and other bicycle, pedestrian, aviation and ferry projects to see which will create the greatest economic boost for the $103 million in transit funds the state receives.

In addition, Gov. Bev Perdue will pursue discretionary funds in the stimulus bill, so NCDOT could replace the Yadkin River Bridge on Interstate 85 in Davidson and Rowan counties. The state estimates that is a $300 million project.

The stimulus bill also includes $8 billion to deploy high-speed, intercity passenger rail, and NCDOT is pursuing some of this money to further develop the Southeast High-Speed Rail corridor between Charlotte and Washington, D.C.

Jenkins says he’s pleased that the stimulus funding will start projects moving again, but “in the long-term, [the stimulus bill] is not going to solve NCDOT’s transportation funding problems. I look at it as a big Band-aid, which helps fill the hole that has been there.”

Useful Sources:

North Carolina Department of Transportation Construction Progress Report
https://apps.dot.state.nc.us/traffictravel/progloc/

North Carolina Department of Transportation:
http://www.ncdot.org/projects/us17bypass/