As published in the May 1, 2012 Toledo Business Journal
Jerry Wray
Ohio Department of Transportation
Ohio Dept. of Transportation to reduce $100M from operations
Toledo Business Journal recently interviewed Ohio Department of Transportation (ODOT) director Jerry Wray. He shared the following thoughts.
Toledo Business Journal: Can you explain the size of the budget shortfall for highway projects in Ohio and potential impact on northwest Ohio?
Jerry Wray: When we talk about our contract program or our project development program, it’s the development of projects to the point that they’re ready to build. That involves reviewing the projects in terms of safety, congestion, quality of life, etc. And it involves the actual letting of the project and the construction. The projects that have become a priority are called tier one. If you look at the tier ones from the standpoint of when they were committed years ago, we are $1.6 billion short of having enough money to build. They’re all a priority and they’re all important to the State of Ohio, but it is a lack of funding.
Tier two is the development of projects. In this tier we have requests for more projects, totaling nearly $10 billion. If we were ready to build the projects today that are under development in tier two, we would be over $10 billion short in having enough money.
TBJ: Does this shortfall also include the Ohio Turnpike and can you discuss expected budget issues involving this toll road?
JW: No, it does not include the Ohio Turnpike. The turnpike, the Commission, and the operation of the Turnpike is completely separate from ODOT and from State government. There is no overlap of their budget with ours.
TBJ: What impact would a lease of the Ohio Turnpike have on budget issues?
JW: We are dealing with an opportunity analysis to determine how to best leverage the asset that is the Ohio Turnpike. That involves a number of options, including ODOT taking it over and selling bonds or a full lease. We’re looking at all the options from an engineering standpoint, legal standpoint, and financial standpoint. We’re trying to determine what would be the best public policy for the State of Ohio. I emphasize public policy because there is some perception that we’re interested in this because we’re trying to squeeze every nickel out of it we can. In fact, what we’re interested in is good public policy. Certainly we’re interested in the revenue, but mainly what we focus on is good public policy. We want to be fair to the people of Ohio and the people of northern Ohio.
Depending on the terms and conditions of anything we might do and of the options we put on the market and how the market reacts to them, that will give us revenue to deal with. It will be determined how we use that revenue.
A lot depends on the deal, if there is a deal, and the amount of revenue after leveraging the asset. I look at it as a bridge until we get a new federal bill or the economy goes up. There is some question about how we are going to fund transportation now and in the future. For us, it is an option that will help us bridge the gap and continue to have a robust contract program and continue to do those projects that are so critical around the State.
TBJ: What other options exist for increasing revenues for Ohio highway funding?
JW: We are looking closely at what we can do internally in reducing our operating costs. We’ve set some goals to cut our own operations by as much as $50 million per year, and if we do that it will not be one time money. That’s $100 million for the biennial. We’re looking at public-private partnerships; the possibility of privatizing non-interstate rest areas; the possibility of sponsorship programs on State-owned facilities, rest areas, bridges, sections of highway; and other opportunities in advertising. We’re looking at the various projects around the state and innovative ways to deliver those projects. By that I mean in some cases it could be a toll, availability payments, and so on. We’re looking for every possible way to solve this problem.
TBJ: Explain the impact of the expected budget shortfalls on the I-475 / I-75 project near downtown Toledo?
JW: The current project that is under construction will not be impacted and is scheduled for completion in late 2013. The second phase of the project has been pushed out until there is funding available. The good news is we are moving forward on the design plans for the I-75 interchange on the assumption that when we get to the point where the project is ready to bid, we will have the money.
That is something important for people to understand because we announced our funding and that’s what it was: a funding list. People have interpreted it as we have stopped working on projects or have dropped projects. That isn’t the case. We are moving full speed ahead on the development of projects on the assumption that when we get to that time, we’ll have the money to do it. The last thing we’d let happen is for us to slow down on these projects and get to the point where we’re ready to build them and we don’t have the capabilities to do so.
TBJ: What impact will these budget shortfalls have on the Route 24 project completion between Napoleon and Toledo?
JW: That project is not impacted by the shortfalls and is scheduled to open in September of this year.
TBJ: What is the revised timing concerning plans to widen I-75 between Toledo and Findlay and what is the expected capital cost of this project?
JW: We haven’t put an estimate on that and that project is being discussed and proposed. We haven’t started the development process of it. It is in discussion, but the timing and cost remains to be determined.
TBJ: What impact will these funding issues have on the plans for Route 18 between the CSX site and I-75?
JW: When we got here last year, the governor pointed out that it is a project of importance. He did not make any promises, but he did say to me, when you look at that project, it seems like it would be a good economic project. We looked at it and committed to advancing it sooner rather than later. We expect to have a groundbreaking in May.
TBJ: Are there any other issues that you would like to address concerning funding of Ohio highways?
JW: So that people can have some understanding of how we arrived at this point, a brief summary would be at the State level and the Federal level, because we haven’t had a federal bill and at the State level because our gas consumption is leveled off, our revenue is stagnant. Down through the decades there has always been increasing money for transportation, whether it was because of consumption increasing or because at the federal level they had more money in the highway trust fund and each time we had a highway reauthorization act, it was more money than the last time. We’re not in a situation where the revenue is level.
At the same time, we’ve had tremendous inflation since the early 2000s in the construction area. What we could buy in 2000 for $100, now costs us $150.
The other thing is we have a very large program. Through the years we have not had the ability or the will to tell people that we had to balance our revenue with our programs. We’ve continued to pile on programs so we’re way over what we can reasonably hope to construct.
A lot of the projects nowadays are what I call megaprojects. We used to get $40-50 million projects and that was a project we considered a very large project. Now we’re rebuilding the interstate. In some areas we’re building under traffic, in some cases in an urban area or over a river crossing. Now we have projects where we have bids in the first or second phase and it’s already an excess of $100 million. You do these projects in a series of phases and in some cases when you’re finished you’ll have spent in the billions.
How we got to the situation we’re in is stagnant revenue, inflation, a very large program, and very large projects.
We are constantly looking at the price of petroleum projects, steel, concrete, and all the things that impact our contracts. We are revising our estimates to make sure we’re not surprised by bids coming in higher than we expected. It’s an ongoing process.