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F I S C A L I M P A C T R E P O R T
SPONSOR Silva
ORIGINAL DATE
LAST UPDATED
2/12/2007
HB 4/aHTPWC
SHORT TITLE Dept. of Transportation Appropriation Act
SB
ANALYST Moser
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
793,193.3
Recurring
State Road Fund, Local Gov’t RF,
Aviation Fund, Transportation Fund
and Federal Funds
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates and relates to HB 2 and HB 7
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
793,193.3
Recurring
State Road Fund, Local Gov’t RF,
Aviation Fund, Transportation
Funds and Federal Funds
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates and relates to HB 2 and HB 7
SOURCES OF INFORMATION
LFC Files
-
Report of the Legislative Finance Committee to the Forty-Eighth Legislature, First Session,
January 2007 for Fiscal Year 2007 – 2008, Volume II, pp. 331 - 337.
- Consensus Revenue Estimate, NMDOT, January 2007.
Responses Received From
NM Department of Transportation (NMDOT)
pg_0002
House Bill 4/aHTPWC – Page
2
SUMMARY
Synopsis of HTPWC Amendment
The House Transportation and Public Works Committee amendment makes the following major
changes to the bill:
•
House Bill 4 appropriates $793,193.3 of Other State Funds and Federal Funds to the New
Mexico Department of Transportation (NMDOT) for the purpose of managing three (3)
programs, within four (4) budget categories.
•
Expands total FTE by 82 within the department.
•
Recognizes additional revenue of $8.93 million based the revised consensus revenue
forecast done in January 2007.
•
Increases effective vacancy rate to 6.0 percent to allow for proposed compensation
package. This budgets this increase rather than having the department having to adjust
operational budget during the fiscal year.
•
Includes $9.36 million for 100 percent state construction program and language
specifying this purpose.
•
Removes restrictive language capping RailRunner expenditures and requiring a budget
submittal by July 2007 for the RailRunner.
House Bill 4 reflects an overall decrease from FY07 of $14.1 million or 1.8%. The majority of
this decrease is the result of projected FHWA (Federal Highway Administration) federal
obligation limitation made available to the state annually through the transportation authorization
act, SAFETEA-LU. House Bill 4, per the January Road Fund Outlook Update, includes a
projected increase for State Road Fund in FY08 of $20.1 million or 5.2% over the original FY07
budget estimate.
House Bill 4, as amended, reflects the House Transportation and Public Works Committee
(HTPWC) FY08 Budget recommendation. House Bill 4, as amended, reconciles differences
between the agency request, the Executive recommendation and the LFC recommendation
through a technical committee process that gains consensus through direction from the HTPWC
Chairman and committee.
FISCAL IMPLICATIONS
House Bill 4, as amended, appropriates $793,193.3 to NMDOT for FY08 and funds the
department’s three (3) operating programs among (4) budget categories. The budget
recommendation includes the proposed state employee compensation package increases within
the personal services and employee benefits FY08 budget. It additionally includes a 100% state
road fund.
The appropriation of $793,193.3 contained in this bill is a recurring expense to the state Road
Fund, Other State Funds and Federal funds. Any unexpended or unencumbered balance
remaining at the end of FY08 shall revert to the state road fund or applicable fund.
pg_0003
House Bill 4/aHTPWC – Page
3
Revenue Estimates:
The department revises revenue estimates in August of each year for purposes of budget
preparation, and again in January of each year for purposes of legislative deliberations. Table 1
shows the actual state revenues for FY05 and FY06, and the August 2006 forecast of state
revenues for Fiscal Year 2007 and Fiscal Year 2008. The fiscal year “Budget Growth" amounts
reflect year-over-year changes in the Department budget levels, which differs from actual
revenue growth. The column marked "Estimate Revision" for the current fiscal year (FY07)
refers to the changes between the “Budget Estimate" used during the 2006 Legislative Session
and the latest revised estimate.
The “preliminary" revenue numbers for Fiscal Year 2006 should be regarded as only
approximate, and could be subject to significant accrual adjustments.
In addition to the (State) Road Fund, the department projects state-sourced revenues for the
Highway Infrastructure Fund, the Local Governments Road Fund, the Aviation Fund, and the
Transportation Program Fund.
Table 1
FY07 and FY08 Revenue Estimates
(Dollars in Thousands)
FY06 FY07 FY07 FY07 FY07 FY08 FY08
FY05 FY06 Revenue Budget Budget Jan-07 Estimate Jan-07 Budget
Ac tual
Preliminar
y
Growth
Estimate
Growth
Estimate
Revision
Estimate
Growth
Road Fund -- Unrestricted Revenues
Ordinary Income:
Gasoline Tax
109,456 109,723
267
110,900
-5,902
111,776
876
113,294
2,394
Special Fuel Tax
87,902 97,127
9,225
96,000
2,500
100,000
4,000
103,400
7,400
Weight/Distance
73,781 76,453
2,672
75,700
-2,020
79,000
3,300
81,400
5,700
Trip Tax
5,724 8,576
2,852
8,000
4,000
8,000
0
6,000
-2,000
Vehicle Registration
67,768 71,470
3,702
70,270
2,955
72,900
2,630
75,100
4,830
Vehicle Transaction
1,130 1,610
480
1,100
-55
1,500
400
1,500
400
Driver's License
4,072 3,944
-128
4,200
-100
4,250
50
4,300
100
Oversize/Overweight
3,232 4,387
1,155
4,000
0
4,500
500
4,635
635
Public Regulatory Commission Fees
3,526 3,676
150
3,400
100
3,600
200
3,600
200
Penalty Assessments (Reinstatement Fees)
1,273 258
-1,015
0
-1,100
0
0
0
0
MVD Miscellaneous
1,200 2,373
1,173
1,900
900
2,444
544
2,518
618
Subtotal Ordinary Income 359,064 379,597 20,533 375,470 1,278 387,970 12,500 395,747 20,277
Road Fund -- Extraordinary Income:
Asset Sales
1,283 861
-422
1,100
100
950
-150
950
-150
Equipment Buy-back Program
257 539
282
1,390
851
1,390
0
1,900
510
“Logo" Signage Revenue
1,076 730
-346
1,000
300
800
-200
800
-200
Other Revenue
2,150 6,989
4,839
1,000
0
1,000
0
1,000
0
Road Fund Interest
1,239 2,055
816
1,700
378
1,900
200
1,400
-300
Subtotal Extraordinary Income 6,005 11,174 5,169 6,190 1,629 6,040 -150 6,050 -140
Total Road Fund (Unrestricted Revenues)
365,069
390,771
25,702
381,660
2,907
394,010
12,350
401,797
20,137
Other Funds:
Highway Infrastructure Fund:
Leased Vehicle Gross Receipts
4,524 5,143
619
4,740
-220
5,300
560
5,450
710
Tire Recycling Fees
1,950 1,734
-216
1,750
-150
1,800
50
1,850
100
Interest
124 352
228
268
55
305
37
270
2
Total Highway Infrastructure Fund
6,598
7,229
631
6,758
-315
7,405
647
7,570
812
State Infrastructure Bank:
Loan Repayments
n/a 4,278
4,278
1,740
1,740
1,740
0
3,350
1,610
Interest Earnings
313 463
150
200
-14
240
40
216
16
pg_0004
House Bill 4/aHTPWC – Page
4
FY06 FY07 FY07 FY07 FY07 FY08 FY08
FY05 FY06 Revenue Budget Budget Jan-07 Estimate Jan-07 Budget
Ac tual
Preliminar
y
Growth
Estimate
Growth
Estimate
Revision
Estimate
Growth
Total State Infrastructure Bank
313
4,741
4,428
1,940
1,726
1,980
40
3,566
1,626
Local Government Road Fund:
From Interest
383 818
435
830
232
940
110
840
10
From Special Fuel
9,199 10,181
982
10,067
263
10,522
455
10,880
813
From PPL Fee
6,772 6,984
212
6,926
-150
6,992
66
7,125
199
From DWI reinstatement fees & ID cards
1,152 1,049
-103
1,150
50
1,150
0
1,150
0
From Gasoline Tax (MAP)
2,151 2,156
5
2,180
-110
2,195
15
2,224
44
Leased Vehicle Gross Receipts
1,508 1,714
206
1,580
-73
1,765
185
1,820
240
Total Local Government Road Fund Income
21,165
22,902
1,737
22,733
212
23,564
831
24,039
1,306
Aviation Fund:
Gas Taxes (Aviation)
388 389
1
395
-18
396
1
401
6
Aviation Jet Fuel
919 703
-216
985
-110
930
-55
1,000
15
Aircraft License Fees
73 68
-5
78
-2
71
-7
71
-7
0.046% of General Fund GRT (Aviation)
714 815
101
781
75
842
61
0
-781
Total Aviation Fund Income
2,094
1,975
-119
2,239
-55
2,239
0
1,472
-767
Transportation Fund:
Motorcycle Registration (Fund 8)
75 86
11
74
1
83
9
85
11
Motorcycle Training Fund Interest (Fund 8)
3
5
2
7
2
8
1
7
0
Driver Improvement Fees (Fund 9)
196 179
-17
190
30
190
0
190
0
DWI Prevention (Fund 10)
162 204
42
160
30
160
0
160
0
Traffic Safety Fees (Fund 5)
878 683
-195
900
0
700
-200
725
-175
Traffic Safety Fees Interest (Fund 5)
37 92
55
80
20
91
11
82
2
Community DWI Prevention Fee (Fund 5)
742
584
-158
750
0
700
-50
725
-25
Ignition Interlock Devices (Traffic Safety) n/a
1,186
1,186 n/a n/a
900
900
550
550
Total Transportation Fund Income
2,093
3,019
926
2,161
83
2,832
671
2,524
363
TOTAL STATE REVENUES 397,332 430,637 33,305 417,491 4,558 432,030 14,539 440,968 23,477
Road Fund
Included in the Road Fund are unrestricted and restricted revenues. Restricted revenues are
typically earmarked funds for special purposes such as Aviation, Traffic Safety programs, and
grants to local governments. Unrestricted revenues (to the “State Road Fund") support the bulk
of the activities associated with the state highway system and, therefore, receive the most
scrutiny during the budget and appropriation process.
Prior year tax revenues (FY06) to the State Road Fund came in about 1.4% stronger than forecast
for budget purposes. Strength in Special Fuels Tax, along with a resurgence in Trip Tax
revenue, more than offset the weakened growth in Gasoline Tax revenue caused by high gasoline
prices.
This latest estimate has revised expected FY07 revenues up by $12.5 million, primarily based on
continued strength in heavy truck (Special Fuels and Weight-Distance) taxes, and stronger than
expected Vehicle Registration revenue in FY2006. While the revenue trend is forecast to
maintain a generally normal rate of growth (about 1% in FY07 and about 2% in FY08), the
growth in the budget is forecast at about $20 million or 5% for FY08.
Aviation Fund
The 34% reduction in FY08 revenue to the Aviation Division results from the sunset of funding
for the Air Service Assistance Program pursuant to Section 7-1-6.7, Subsection C.
pg_0005
House Bill 4/aHTPWC – Page
5
SIGNIFICANT ISSUES
Federal Funding Outlook.
The Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) was signed by President Bush on August 10, 2005,
ending a two-year effort by Congress to reach agreement on funding for highway, highway
safety, motor carrier safety, and mass transit. This bill authorizes funding for federal fiscal years
(FFY) 2004-2009.
Over this five year period, New Mexico was scheduled to receive $1.8 billion in highway
funding, representing a 30.3 percent increase over SAFETEA-21 levels. Due to rescissions
imposed by Congress, New Mexico in FY08 alone may only receive about $321 million, $35
million less than was received in FY07. Similar obligation shortfalls are expected for the
remaining years of SAFETEA-LU. Actual amounts are unknown because of the seemingly
endless continuing resolutions in the federal budget process. Additionally, the number of
earmarked and high-priority projects designated within SAFETEA-LU has grown substantially
from prior years further impacting the availability of federal funding for state defined projects.
Reductions in federal funding significantly impact the state’s ability to maintain and preserve its
existing roadways. Without the expected growth in these funds, the department does not have
sufficient resources to address future needs and to keep pace with escalating construction costs.
In FY07, federal highway funding accounts for 61 percent of the debt servicing requirements of
the department.
STIP and GRIP Implementation and Project Planning
.
To fund GRIP, the Legislature in
2003 authorized the issuance of $1.6 billion of bonds over an eight-year period to fund 37
transportation projects, including commuter rail in the Interstate 25 corridor. Debt service for
these bonds comes from the state’s existing dedicated federal and state transportation revenue
streams.
Prior to passage of GRIP legislation, many of the corridors and projects identified in GRIP had
been programmed in the Statewide Transportation Improvement Plan (STIP) using federal funds
for one level or another of pavement preservation for the period between federal fiscal year 2004
and federal fiscal year 2009. It is estimated that over $338 million in this STIP funding will
“overlap" GRIP funding. This overlap gave the department the ability to accommodate the
additional cost of $318 million associated with the commuter rail. When added to the original
$1.585 billion for GRIP, the true cost of the GRIP program is closer to $2 billion.
As predicted, GRIP has had a positive economic impact on the state. Major projects were able to
be moved forward years ahead of schedule. Presently over 97 percent of the GRIP projects have
been awarded to New Mexico contractors with over 1,700 private sector jobs created throughout
the state.
GRIP was initiated in response to a study conducted by NMDOT that showed $11 billion in
needs on state-maintained roads. At the conclusion of the GRIP program in 2011, the total STIP
program will shrink in size to less than $150 million per year with approximately $9 billion in
needs, in 2003 dollars, left unmet. The department’s bonding capacity will be extremely limited
based on the size of debt remaining on the GRIP bonds. Alternative funding mechanisms are
needed not only for the vast statewide needs but also the very different and costly needs found in
the growing metropolitan area of Bernalillo, Sandoval, and Valencia counties. The department
must consider how, post GRIP, the state will handle the expensive major projects in metropolitan
pg_0006
House Bill 4/aHTPWC – Page
6
areas without significantly depleting STIP statewide. The department should initiate serious
study of this issue sooner rather than later.
The implementation and coordination of the STIP program with the GRIP represents a
continuing challenge for NMDOT. GRIP is driving the STIP. In FY08 GRIP projects alone will
account for 79 percent of all construction activity within NMDOT.
Inflation. In December 2005 the department reported to LFC it had experienced 12 percent
inflationary growth on all GRIP projects. The department projected at that time that inflation in
FY06 would be about 3.5 percent. Unfortunately, the FY06 inflation level was closer to 28
percent. This inflationary spiral is associated with the price of oil combined with national
shortages of both steel and concrete. It has dramatically increased project costs, delayed
construction, and required the use of STIP funds from the deferred projects to supplement the
GRIP program. The department in October 2006 estimated that GRIP is under-funded by $250
million and the remainder of STIP by as much as $120 million for plan years 2005 to 2009.
These cost increases are not unique to New Mexico and other states are struggling with the same
issues regarding the continued funding of their programs.
NMDOT Cost Increases
FY03 to FY06
2.2%
8.5%
12.0%
28.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
FY 03 FY 04 FY 05 FY 06
NM A ctual Cos t inc rease
CPI
Source: NMDOT and Bur eau of Labor
The department anticipates continued adjustments will be required for both GRIP and STIP
projects with the expected continuation of this inflationary trend. The department continues to
stress that projects within STIP will be completed but may be delayed to meet the new funding
requirements.
Through October 2006 NMDOT had designed and let for construction 35 GRIP projects valued
at over $421 million. This represents approximately 24 percent of the total GRIP program.
Eighty-four projects are under contract for design with an additional 70 projects being designed
in-house. The department is scheduled to have spent $677 million by the end of FY07, $30
million less than originally projected.
The construction community might not have the capacity to accommodate such an aggressive
program, especially in light of steep inflationary pressures and lack of materials. This concern
partly stems from the observation that actual payments to contractors from GRIP proceeds have
pg_0007
House Bill 4/aHTPWC – Page
7
not kept pace with the planned drawdown for GRIP proceeds. Paying debt service on bond
issuances does not make financial sense.
Bond Program and Debt Management. The department has a total outstanding debt of $1.6
billion with an FY08 debt service obligation of $139.2 million for all NMDOT bonds. The
Transportation Commission established an internal policy limiting annual debt service for all
bonds to no more than $160 million. The GRIP bonds account for $1.14 billion in outstanding
principal with a final maturity date in 2024. Total GRIP interest and bond expenses will total
$720 million through maturity of the bonds.
Road Maintenance. Maintenance costs for FY06 also accelerated dramatically. In addition to oil
and material costs, other major factors contributing to these high costs are the mobilization of
materials and equipment to remote areas. The total number of lane miles within the NMDOT
system has increased by 10 percent as has the average number of miles maintained per FTE since
FY97.
Chip-Seal Program. This program is a major component of the maintenance program of the
department. Chip-sealing resurfaces existing roads, thus prolonging their lives. Between FY99
and FY06, chip-sealing costs increased 92.3 percent, and the miles sealed decreased 42.6
percent. In 1999 the 2,400 miles chip-sealed equated to a five to six year maintenance cycle. In
comparison, the 1,378 miles sealed in FY06, at over $7 thousand per mile, equates to a nine to
ten year cycle. By moving to a nine to ten year cycle, the quality of the roads throughout the state
will erode at the same rate but will take twice as long to be repaired as in the past.
Bridge Maintenance. The state has 256 bridges considered structurally deficient. This is a
decrease from a high of 281 deficient bridges reported in FY04. Funding levels for bridge
maintenance are at an all-time high with many bridges scheduled for replacement within various
STIP and GRIP projects. Bridge replacement costs have risen from an FY05 cost of $75 per
square foot to FY06 estimates of $110 per square foot. These increases are a direct result of
rising steel, concrete, and energy pricing.
Public Transportation Initiatives. The department’s strategic plan includes as a key element the
development of transportation alternatives, such as commuter rail or bus service.
Commuter Rail. GRIP legislation provided for reconstruction and improvement of the Interstate
25 (I25) corridor from Belen to Santa Fe to accommodate public transportation elements,
including commuter rail. In a partnership between the department and the Mid-Region Council
of Governments (MRCOG), NMDOT is approaching commuter rail in two phases: Belen to
Bernalillo, and Bernalillo to Santa Fe.
Phase one service between Albuquerque and Bernalillo began on July 14, 2006. Service between
Albuquerque and Belen is behind schedule and tentatively scheduled to begin December 2006.
MRCOG is targeting December 2008 as the completion date for phase two. This phase will
require building approximately 25 miles of new track around La Bajada and into Santa Fe. Public
hearings have been held and are continuing regarding the selection of this route.
NMDOT has earmarked $318 million of GRIP funds and another $75 million of federal monies
for the completion of the commuter rail project. The federal funds are contingent on successful
acceptance of the department’s alternative analysis by the federal government. The New Mexico
Legislature in 2006 made the department’s appropriation for contractual services contingent on
pg_0008
House Bill 4/aHTPWC – Page
8
total costs for commuter rail not exceeding these levels.
In FY06 the department purchased 10 bi-level passenger rail cars ($22.9 million) and four
locomotives ($9.6 million). A fifth locomotive was purchased for $2.25 million using monies
from Sandoval County. Station costs are estimated at $16 million for seven stations with some of
the costs of the Bernalillo station to be paid by Sandoval County.
NMDOT and MRCOG are finalizing an operational budget that will outline both operational
revenues and expenses for the next three to five years. This projection will also include forecasts
of capital needs. These budget projections are critical because expected operational losses will
need to be offset by other revenue sources. Preliminary analysis indicates that to some extent
these revenues may come from the state road fund. This would overload a funding stream
currently hard-pressed to meet the needs of the state highway system.
Phase one operational costs are being subsidized for the first three years of operation with federal
congestion mitigation and air quality (CMAQ) funding of $10 million per year. MRCOG
estimates actual costs will be about $14 million per year.
Investment in public transportation systems, such as commuter rail, is good public policy
provided that the benefits outweigh the costs. The development of light rail systems within
congested metropolitan areas in addition to enhanced high occupancy vehicle and bus
transportation efforts, such as Park and Ride, may represent a greater benefit to the public than
the establishment of a commuter rail system.
Sustainability of Park-and-Ride Programs. The development of consumer demand for public
transportation is not simply an issue of generating sufficient volume, but also an issue of
changing behavior. The surge in retail gasoline prices has served as that change agent. Park-and-
Ride ridership levels are at an all time high. The communities being served by Park-and-Ride are
concerned that NMDOT will seek to reduce funding levels for park-and-ride programs as
commuter rail to Santa Fe becomes reality. This would be a mistake. These two programs should
not be viewed as competitors but rather as complementary services with each serving a distinct
need.
Park-and-Ride ridership has more than doubled on the Albuquerque-to-Santa Fe route due to the
sharp rise in gasoline prices. In FY06 the department opened new routes between Santa Fe and
Las Vegas and between White Sands missile range and Las Cruces. However, the Espanola
routes continue to experience ridership issues that have resulted in reviews of service. The
department has effectively adjusted routes and service levels to meet demand. NMDOT should
continue to evaluate costs and benefits, including the impact of reduced traffic congestion.
Additionally, all alternatives should be considered in meeting public transportation needs. Van
pools for certain markets might be more practical and affordable in addressing commuters’ needs
than Park-and-Ride buses.
PERFORMANCE IMPLICATIONS
Performance targets set under the Accountability in Government Act and those listed in HB 4 are
a culmination of meetings between the Agency, the Executive, and the LFC. In light of increased
revenue these targets have been set with realistic improvement standards for maintaining the
current conditions of the highway system and continued improvement in other programs. The
pg_0009
House Bill 4/aHTPWC – Page
9
following table reflects the FY08 performance targets recommended by the HTPWC outlined in
HB4.
1 Infrastructure and Programs
HB 4
A Quality: Ride quality index for new construction
>=4.3
B
C
Output: Annual rural public transportation ridership
Output: Revenue dollars per passenger on park and ride
700,00
0
$2.25
D
Explanatory: Annual number of riders on park and ride
275,00
0
E Outcome: Annual number of commuter rail riders between
Belen and Bernalillo
300,00
0
F
G
Quality: Percent of final cost over bid amount
Explanatory: Percent of programmed projects release to
bid according to schedule
<=4.0
%
85%
H
I
Outcome: Percent of front-occupant seat belt use by the
public
Outcome: Number of alcohol-related traffic fatalities per
one hundred million vehicles miles traveled
91%
.88
J Outcome: Number of non alcohol-related traffic fatalities
per one hundred million vehicles miles traveled
1.12
K Quality: Percent of runway miles rated good per federal
aviation administration standards in public use airports
60%
2 Operations
HB 4
A Outcome: Number of statewide improved pavement surface
miles
4,500
B Efficiency: Maintenance expenditures per lane mile of
combined system miles
$3,500
C Quality: Customer satisfaction levels at rest areas
90%
3 Program Support
HB 4
A Outcome: Percent of vacancy rate in all programs
10%
B Quality: Number of external audit findings
<=4
C Quality: Percent of prior-year audit findings resolved
100%
D
E
Efficiency: Percent of payments made in less than thirty
days
Output: Number of worker days lost due to accidents
99%
127
pg_0010
House Bill 4/aHTPWC – Page
10
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Related to HB 7 and HB2
GM/csd