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July 1, 2010
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At the Crossroads

State road builders worry about capacity to fund a system vital to the nation’s and commonwealth’s economies

By Sean Slone

Workers with Gohmann Asphalt and Construction of Clarksville, Ind., widen Interstate 64 in eastern Jefferson County from two lanes to three in each direction. Work is to be completed in fall 2010. Gohmann will also widen the adjacent section of I-64 into Shelby County. That contract is to be completed in summer 2011.

With north-south and east-west interstates that are major arteries for much of the nation, Kentucky is literally at a crossroads for the flow of U.S. commerce.

That flow will accelerate in 2014 when a $5.2 billion Panama Canal expansion is complete, said Charles Lovorn, executive director of the Kentucky Association of Highway Contractors. New locks accommodating larger vessels will double shipping capacity and route Pacific freight to U.S. ports on the Gulf of Mexico, then onto trucks, many of which will pass through the commonwealth.

“There are two shipping ports being constructed right now in Louisiana and Alabama,” Lovorn said. “The main roadway that goes north-south from these two shipping ports is going to be I-65, and then (trucks are) going to split off and go east and west along I-64.”

By 2021, state truck transport tonnage will increase 25 percent, predicts the Kentucky Motor Transport Association, an industry trade group. It’s imperative state roadways be prepared to handle the additional traffic, KMTA President/CEO Jamie Fiepke says.

“An efficient and effective highway system is critical to our industry,” Fiepke said. “Over 89 percent of the communities in Kentucky depend exclusively on trucks to move their goods.”

These issues, according to Lovorn, put the commonwealth figuratively at a crossroads also.

“We’re going to come out of this economic funk, and we’re going to grow,” he said. “And the growth factor is: Are we going to be prepared for it? How do we get there? We have the (contracting) resources available to do it, but the financial side of it is kind of scary.”

In the highway contractor community’s view, the state isn’t spending enough to maintain and upgrade the 27,000 miles of road that are the Transportation Cabinet’s responsibility. While the state has let an average of $790 million in highway construction contracts annually the past decade, the state needs to spend more like $900 million to $1 billion per year, Lovorn said.

Kentucky Transportation Secretary Mike Hancock sympathizes, but said for now the cabinet’s goal is to make the highway budget predictable. Spending has roller-coastered from more than $1.5 billion to less than $450 million in individual years.

“Our folks are working to structure the contract awards in such a way that they’re at least in a consistent range, whether that’s consistently at $800 million a year or $900 million, a billion a year – whatever we could muster,” Hancock said. “I have said with this recently enacted road plan that I would love to be able to deliver as much as a billion dollars a year in construction projects. I know that’s going to be tough, but that would be a wonderful thing.”

Meanwhile, Hancock said, the Panama Canal project will impact not only highway but rail and water transport, too. While some even predict lower truck volumes, he said, there’s no doubt it will increase transport in Kentucky and the rest of the U.S. midsection.

“I think there’s going to be so much freight that the opportunities are going to be there for all modes to contribute,” Hancock said. In addition to highways, state transportation officials are considering issues such as the status of its ports, he said.

“(The state doesn’t) have the money right now to maintain those 27,000 miles on the cycle that’s needed to keep those roadways in good condition,” said Arthur Walker III, vice president of the Civil Construction Division for The Walker Co., a Mount Sterling-based road building firm.

Even with the federal stimulus spending for highways, Walker says an overall lack of road construction activity in the state has meant many contractors are out of work. The Walker Co. is one of 600 contractors pre-qualified to do business with the state.

“Nobody’s busy,” Walker said. “We’re starving for work.”

“Prices are cheap and (contractors) are having to go farther to find the work,” Lovorn agreed. “That’s a real concern. If you don’t have good long-term work, you just can’t sustain this very long before you lose that base (of contractors) or something happens.”

Funding has been approved for a number of long-term state projects, but the process of spending those dollars has been slow, Lovorn said.

“The 2009 legislature approved $400 million in economic development bonds for transportation” projects, he said. “Very little of that funding has found its way to construction projects yet. The 2010 special session (recently) added another $400 million. … It would appear that some help is on the way, but we need to see it.”

Projects in recent months have typically been smaller and of shorter duration. There have been 17 percent fewer bid lettings this year worth 29 percent less than in 2009, the Associated General Contractors of America reported in May.

The shift to fewer, smaller, shorter projects may have been prompted by the lack of a new federal transportation authorization bill and the Recovery Act’s focus on projects that were “shovel-ready” and could be completed quickly.

Efficient vehicles pay less tax
The funding dilemma goes beyond Kentucky, Lovorn said. The gas-tax highway finance model for the United States is growing outdated as vehicle mileage improves, said Stan Lampe, president of Kentuckians for Better Transportation, a Louisville-based advocacy group. Indeed, some new vehicles use little or no motor fuel.

Road funding sources “were set up for one type of (economic) climate, and now we’re entering into another type of climate – and there’s no real appetite to modify it or change it,” Lovorn said. “Yet, they continue to overprogram the system to the point that we have projects on the books that won’t happen for years, and the need for those projects is immediate.”

“Gasoline tax funds,” Lampe said, “have been down dramatically in the last couple of years as cars continue to improve in miles per gallon.”

Yet state and federal governments are stuck with the gas tax as a principle transportation revenue source for the foreseeable future. Some states have experimented with a tax that charges motorists by the mile rather than by the gallon, tracking travel with GPS systems or other technology. Such a system has won the endorsement of two federal commissions in recent years.

“I don’t see Billy Bob out in the hinterlands of Kentucky getting his pickup truck converted to do that,” Lovorn said. “I don’t see anything immediate or quick to replace the existing pay-as-you-go tax per gallon.”

Kentucky’s two-year road plan
State government is pressing ahead to meet road system needs and serve the state’s economic future.

At a special session in late May, Kentucky’s General Assembly approved the state’s 2010-12 road construction plan, a 245-page document that outlines spending totaling $4.45 billion. The legislature did not raise any new tax revenue to fund the plan but did authorize $400 million in bonds for road construction. Much of the rest comes from federal funding sources.

“There are 28 or 29 revenue streams that fund about 1,100 projects,” said Lampe. “This is an extremely complex document. Think about a Rubik’s Cube that’s as big as your house. Certain projects can use certain revenue streams, and there are projects ineligible to use certain revenue streams.”

Hancock explains it this way: “When we widen an interstate route like I-65 … there’s only a certain percentage of the widening project that’s eligible for (federal) Interstate Maintenance funds; that is the four lanes already there eligible to be maintained. When you add another lane in each direction, you have to fund that from a different source. … So we get into all kinds of funding gymnastics to make projects come together.”

Hancock and Lampe both say the plan is a remarkable accomplishment for the state and its leaders, especially in the current economic and political climate.

“I think it sends a very strong message that Kentucky is serious about maintaining our transportation infrastructure,” Hancock said. “Any business that would be looking to locate in Kentucky I think would want to have that kind of reassurance.”

The plan, Hancock points out, funds four major bridges upgrades – two U.S. 68/KY 80 bridges over Lake Barkley and Kentucky Lake; the U.S. 60 bridge over the Tennessee River near Paducah; and the Ohio River bridge between Milton, Ky., and Madison, Ind.

But Lampe cites another, smaller project as illustrative of the interconnectedness of Kentucky’s transportation system and its importance to economic development. Jefferson County is getting $3 million to plan and design an expected $20 million relocation of Crittenden Drive near the Louisville airport.

“It’s being relocated so there can be a new taxiway built at the airport,” Lampe said. “Why is that important for the economy? Because UPS’ continuing expansion at the Louisville airport is good for air service and air traffic and economic growth and employment and so on. There’s an example of a road project that’s being designed to improve air service and promote economic development and support economic growth in Kentucky, and there are dozens of them like that all across the state.”

Good interstates mean good jobs
Beyond their key role in moving commerce through the state, Kentucky’s interstates are valuable assets for attracting economic development. I-65 and I-75 each have seen major widening and improvement projects in recent years, and more is planned, according to Hancock.

The I-65 corridor includes two important economic development sites the state hopes to nurture: Kentucky Transpark, a business park on the north side of Bowling Green, and a state-owned industrial site near Glendale, south of Elizabethtown, Hancock said.

“We’re looking to continue the widening of I-65 to six lanes from the Nunn Parkway up to Cave City,” he said. “We’ve got about $300-400 million worth of work left between Cave City and Elizabethtown that someday we’d like to do.”
That interstate also includes a four-lane stretch through Hart and Larue counties that has seen deadly accidents, including one in March that killed a family of 10 Mennonites. The two-year road plan funds temporary concrete barriers to make that section safer.

While I-65 has been widened recently in the Louisville area thanks to last year’s Recovery Act funding, issues remain there also. Spaghetti Junction – where I-65, I-64 and I-71 converge in downtown Louisville – is the 11th worst bottleneck in the country, according to a study issued last month by the American Transportation Research Institute and the Federal Highway Administration. A Spaghetti Junction reconstruction is part of a larger project the state is working to fund that will include two new Ohio River bridges.

Toyota relies on Kentucky roads
I-75 is a key corridor for many of the businesses along it, including one of Kentucky’s largest employers, Toyota Motor Manufacturing Kentucky in Georgetown. Rick Hesterberg, assistant manager for external affairs at the 1,300-acre plant, said Kentucky’s interstates were an important selling point when Toyota officials began meeting with then-Gov. Martha Layne Collins in the mid-1980s.

Now, for Toyota and other companies already here, the focus is on making sure Kentucky’s road assets are adequately maintained.

“We’ve got 465 trucks coming in and out of our plant and using Kentucky roads every single day, and we have 90 suppliers in Kentucky that we use that supply us directly,” Hesterberg said. “But then you have to consider all the roads that the tier-two and tier-three suppliers are also utilizing. … There are other suppliers that are supplying those suppliers with parts. So it’s a multiplier effect. I think that the biggest challenge and concern for any company would be just the regular maintenance of the roadways.”

Toyota is working with the state to ensure that a new shopping center and arena being built in Scott County won’t adversely impact the flow of traffic in and out of its plant, Hesterberg said. The state is considering a new interchange for the southwest corner of Toyota’s property to help ease the flow of traffic to I-75.

Promoting Kentucky’s parkways
Some believe Kentucky’s roadway assets extend far beyond its interstates and that the state could do a better job of promoting those assets to increase economic development.

“When you go to other states and mention the word ‘parkway,’ that may have the connotation of a forested, recreational, scenic path to drive on in your car on a weekend,” Lampe said. “Our parkways in Western Kentucky and even in Eastern Kentucky are really interstate-quality roads. We may be able to better market ourselves … if we can call them something other than parkways. Maybe we need to call them ‘intrastate highways.’ ”

Hancock said such marketing efforts may be helped in the future by work being done now to upgrade portions of three parkways in Western Kentucky.

“We’ve done a great deal and are looking to do more to recognize the Purchase Parkway, the Pennyrile Parkway and the Western Kentucky Parkway as future interstates and are working to do some things that someday will enable those routes to become part of the official I-69 corridor once completed,” Hancock said.

When completed, I-69 would be a seven-state, 2,600-mile corridor that would pass through Kentucky and traverse a proposed new $1.4 billion Ohio River bridge to be built near Henderson. The I-69 corridor is sometimes called the NAFTA Superhighway due to its potential to assist in trade with Canada and Mexico. It could become another major asset for Kentucky in attracting economic development and commerce. The state’s two-year road plan includes $50.72 million for eight projects aimed at making I-69 a reality.

“They’re beginning to fund projects, and those roads are important,” Lampe said. “They’re clearly not waiting for federal funding for the bridge. They’re moving ahead to link up other pieces of the parkway to make it a higher quality road and make it able to meet the interstate standard.”

Collaborative process
Hancock says the process by which road projects are chosen is a collaborative one involving not only officials in Frankfort but also metropolitan planning organizations and area development districts around the state. At every level, the state’s economic future is always a factor in the decision making.

Still, Hancock said, that shared vision is constrained by the lack of funding available to tackle Kentucky’s road needs.

“We remain concerned that we have enough money to meet the needs of our highway system, and my primary focus is on maintaining the system that we have,” he said. “While I, as much as anybody, enjoy new additions to the system, the most critical, most pressing need right now is to make sure that our parkways and our interstates are well surfaced and meet the needs of people as they move about the state and also that our bridges are safe.”

The challenges Hancock and other state transportation officials face are enormous, according to Lampe.

“Kentucky’s Transportation Cabinet has more responsibility for more roads than most surrounding states,” he said. “Ohio is a huge state with massive resources, but the Kentucky Transportation Cabinet’s overall responsibilities and overall reach are even greater than Ohio’s, and we think they’re doing really a commendable job under very difficult times and with very limited resources.”

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