Clement: Infrastructure investment an 'urgent' need: new state DOT chief says growing agency deficit will affect economic development.
Durham resident Chris Clement, an engineer by training, oversees a $600 million transportation agency of over 1,600 employees.
He served as deputy commissioner and chief operating officer of the New Hampshire Department of Transportation from July 2008 to February 2010, when he was named to head the Governor's Office of Economic Stimulus.
This interview originally appeared in New Hampshire Highways, the quarterly publication of the New Hampshire Good Roads Association.
* Q. You have assumed the helm at NHDOT during a very difficult time both economically and politically. What are the key challenges that the department faces in the year ahead?
A. Other than cutbacks in state funding, for the first time in our history we're looking at a significant cut in our portion of federal highway funds. We could be receiving 30 or 35 percent less from the federal government next year.
* Q. What does that mean in dollars?
A. In recent years, the New Hampshire has been receiving between $140 and $150 million from the federal government to maintain a portion of our state's highway and bridge infrastructure_ Potential cuts on the horizon would bring that figure down to $100 to $110 million.
Q. How does this impact the 10-Year Highway Plan?
A. We have revised the plan to reflect this kind of more drastic cut in federal funding. We have to. get ready for that.
* Q. So you are saying that whatever happens, you just want to keep the 10-Year Highway Plan based in reality and financially constrained?
A. Yes, the 10-Year Highway Plan has been revised downward more than a few times over the years, let's just say that our vision of what needs to be done hasn't matched with available funds for a very long time_ And the consequences of this kind of thinking--and funding--are finally starting to sink in and make sense to more and more people. The reality of "bumpy and poorly maintained roads" has entered our national consciousness. What more of a sign do we need?
Have you noticed some of the commercials on TV? Car manufacturers are promoting vehicles that can handle the poor quality American roads.
* Q. How will this "de-funding" of our highways and bridges affect cities and towns?
A. In a very profound way. But it's a lot easier to go before the 234 New Hampshire dries and towns now and tell them the truth as we see it today--that it looks like there are going to be significant cuts to our funding, and these are the potential consequences--'than it would be to soften the blow with wishful thinking.
It's certainly possible that Congress could make a better decision and at least keep funding at current levels. And make no mistake--our "current level" of funding hasn't been dose to adequate for many years.
* Q. How has this news been received?
A. We've had 27 meetings about it during the 10-Year Plan process. We have met with road people throughout the state. I must admit that I was apprehensive at first. A few long tenured employees in the department who have been around here longer than I have were a lot more apprehensive than I was, though. So it was really their amazement about how well we were received that helped me appreciate how important it was just to tell the truth to people. The truth is that we believe that there are serious budget cuts coming, and we need to prepare for them.
* Q. So what's going on with state funding?
A. In the legislative session that ended in June, $95 million was cut from the department's 2012-2013 fiscal year budget. A large part of this cut involved the legislative decision not to extend the registration fee surcharge This surcharge was enacted just a few years ago as a temporary approach to increase revenue for the Highway Fund. This was enacted during the previous Legislature, before the change in 2010. It brought in $45 million a year, and it helped to moderate the impact of the declining revenue we were receiving from the gas tax to the Highway Fund.
* Q. Less money from the gas tax?
A. Yes, revenue from the gas tax has been declining for years. Cars are more fuel-efficient. People are driving less--which equates to less revenue. New Hampshire also hasn't raised its gas tax since 1991, so it has probably been lower than it should have been for a long time" despite these other factors.
* Q. So there's less money from the feds and less money from the state. What's the handwriting on the wall?
A. Without adequate funding, the department is facing an expanding deficit that could reach $1.1 billion by 2022 in operating and capital funding--not counting the $365 million needed to complete the rebuilding and widening of 1-93. A growing concern is fuming for DOT operations as we look at the 2014-2015 biennium.
Starting in 2014, the next biennium, we'll be at least $67 million in the negative in terms of our operating balance, unless something is done very soon to address the revenue stream to the highway fund.
Or if we. don't act, we need to completely change the mission and goals of the department. It's either we have additional revenue, or we change our mission.
* Q. How would the mission change?
A. We're not quite there yet. But we do need to decide what we, as a state and nation, believe the role of government to be in keeping our transportation infrastructure strong, safe and responsive to local needs.
When I say that we will need to change our mission, at this point all I'm saying is that without additional revenue, people and programs will have to go, and there will be consequences.
* Q. And our decision about the role of government involves decisions about spending and revenue.
A. There's no doubt in anyone's mind that transportation infrastructure investment creates jobs, enhances economic development, and keeps people safe. What's lacking is any sense of urgency. Infrastructure spending is about what we envision together as a community, state, and a nation. In short, the primary role of transportation is to support the economy. But our elected government officials--at all levels--must act soon to address the revenue side of the equation. If they don't, we'll no longer be able to do what we do today.
* Q. So what is your "mission-driven" challenge today?
A. We're here to keep over 4,500 lane miles of roads and over 2,100 bridges in decent shape so that goods and services and people can get where they need to go.
The challenge we face can best be understood by just thinking about our bridges. Of the over 2,100 bridges we are responsible for, 148 are on our state's Red List. That means they're structurally deficient. These bridges need to be monitored more carefully by professional engineers who know the bridge, know their math, and can fully analyze both the structural and safety problems. That takes personnel. And when a bridge is deemed unsafe, we downpost or dose it, just like what happened on July 27, 2011, when the Memorial Bridge was dosed in Portsmouth. Prior to the closure, the Memorial bridge was the state's number one Red List bridge
* Q. What are our next steps?
A. Economically, we need to step back and look at what's going on worldwide, as well as nationally and on a state level. The industrial expansion in China, for example, has slowed considerably. The world demand for oil has slowed down too. A lot of costs have stabilized or are coming down. For those reasons alone it's an opportune time to build and invest in our infrastructure
Q. Why is that?
A. There are three things to consider here First, we'll probably never see bond rates as low as they are today. They're about 2 percent or so. Yes, it's debt, but it is manageable debt. The cost of capital right now is incredibly low.
Second, the bid prices that we're getting from our contractors are in some cases up to 15 to 20 percent below our estimates. We know that our private contractors are hurting and need the work, and we don't want to exploit this situation, but this competitive environment can also help us get things done.
Third, as I mentioned before, material costs have stabilized. If we look at all these factors, building now makes a lot of sense.
* Q. Given the long list of critical projects we have, what rises to the top?
A. The list of projects is long, but if I had to name one construction project that would have the largest impact on our economy; it would be completing the 1-93 upgrade from Salem to Manchester. That's been deemed the most important construction project based on what our Legislature has said. So if you look at I-93 from an investment point of view, what a great time it is to invest
* Q. What are the costs to complete the 1-93 project?
A. We need $365 million to finish the rebuilding and widening of 1-93. Projects at Exit 2 and Exit 3 add up to about $115 million. That's what is left in the GARVEE bond authorization we already have. We've used $80 million so far.
But what everyone needs to understand is that if the 30 percent cut in federal funding isn't reversed, we can't use the GARVEE bonds. We wouldn't be able to pay the interest. That means the 1-93 project comes to a stop unless we as a state find a way to fund it.
* Q. What do you think is going to happen?
A. There are a number 0fthings that could happen. The federal government could level-fund us with a new authorization bill. If that happened, the interchange work and capacity improvements at Exit 2 and Exit 3 would be put out for bid in February 2012. The remaining $250 million in capacity improvements, widening to three lanes both north and south from exit 3 north to the 1-293 split, could either be bonded with one issuance, or completed in sections by paying as we go.
* Q. And the balance of the $365 million?
A. The $250 million to complete the project involves capacity improvements up to the 1293 interchange, three lanes in both directions.
* Q. If the reds don't come through, how would any of this be possible?
A. We, as a state, can decide to move forward and finish 1-93 on our own no matter what the federal government decides to do. If we could find a revenue source, whether it's a bond or some other way, we could do that. And there are many benefits to just getting it done
* Q. Such as?
A. It would mobilize the construction community in an unprecedented way, to do it all at once That would save money, too, just in terms of equipment and personnel, rather than the more piecemeal approach we've had to take up until now.
Also, as I said before, with interests rates at 2 or 2.5 percent, bonding costs are at historical lows. And finally, the bids we're getting from contractors are coming in much lower than our estimates.
* Q. So we can all be in agreement that 1-93 is important, but it all hinges on our funding decision.
A. I'm a New Hampshire native, born and educated here, and love the fact that we're conservative and cautious when it comes to expending public funds for any project.
Politically, establishing a dedicated funding source that would enable us to finish the 1-93 project is probably as difficult as the construction work itself.
In New Hampshire, raising fees or taxes is not an easy thing to do. But if we were to do that, we're not only going to save millions of dollars for all the reasons I've mentioned previously but also create significant economic opportunity all along the corridor.
* Q. So a dedicated funding source for 1-93 would change the 10-Year Highway Plan?
A. Yes, and when we can remove the cost of I-93 from the 10-Year Highway Plan a significant number of the projects now in the "deferred" column would move into the "active" column.
* Q. Is there political will to do this?
A. I believe that there is the political will to complete the project. Whatever the funding solution might be, whether it's an increase in the gas tax, a registration surcharge" a toll, or some combination of things, we can tell people that when 1-93 is done, the entire state will benefit
And if there is any kind of fee increase, I believe it has to be dedicated and restricted. These funds can't go into the Highway Fund. If we tell the public that this is what it's for--100 percent for 1-93 completion--I believe that the public will get behind it.
* Q. Do you think that there will be legislative movement on this issue?
A. I don't know, of course" but I believe that it's possible There's certainly a lot of new interest about this issue coming from all sides. The time to do this is now.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||ENGINEERING; Chris Clement|
|Publication:||New Hampshire Business Review|
|Date:||Feb 10, 2012|
|Previous Article:||Is it time for you draw up a cloud road map?|
|Next Article:||Building in 2012: a look at the trends.|