Call to Order and Roll Call
Thefirst meeting of the Budget Review Subcommittee on Transportation of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, June 23, 2011, at<MeetTime> 10:00 AM, in Room 154 of the Capitol Annex. Representative Sannie Overly, Chair, called the meeting to order, and the secretary called the roll.
Members: Senator Jimmy Higdon, Co-Chair; Representative Sannie Overly, Co-Chair; Senator Ray S. Jones II; Representatives Hubert Collins, Tim Couch, Danny Ford, Jim Gooch Jr., Dennis Keene, Sal Santoro, John Short, and Jim Stewart III.
Guests: Representatives Tom Burch, Larry Clark, Ron Crimm, Wade Hurt, Joni Jenkins, Charlie Miller, Michael Nemes, Darryl Owens, and Tom Riner. Secretary Mike Hancock; Gary Valentine, KY Project Manager, Louisville-Southern Indiana Ohio River Bridges Project; David Talley, Branch Manager, Office of Budget and Fiscal Management; and Russ Romine, Executive Staff Advisor, Office of the Secretary; Transportation Cabinet.
Chair Overly welcomed members of the Jefferson County House Delegation who had been invited to hear testimony regarding the Louisville-Southern Indiana Ohio River Bridges project (LSIORB). She then invited Transportation Cabinet officials to provide a brief overview of the LSIORB project scope and cost changes.
LSIORB Potential Cost Savings and Project Scope Changes
Cabinet Secretary Mike Hancock introduced Russ Romine, Executive Advisor, Office of the Secretary; David Talley, Branch Manager, Office of Budget and Fiscal Management; and Gary Valentine, Kentucky LSIORB Project Manager. Mr. Valentine outlined the potential cost savings and project scope changes for LSIORB.
In response to a question from Representative Crimm, Mr. Valentine said one side of the parallel bridges travels north while the other travels south.
In response to a question from Representative Owens regarding project sequencing, Secretary Hancock said that LSIORB is considered to be two bridges, but one project. Mr. Valentine added that work would be done concurrently at both locations. Secretary Hancock said, due to the complex magnitude of the project, the East End bridge may open first. Due to Spaghetti Junction being more difficult, it could take longer.
In response to a question from Representative Burch, Mr. Valentine stated that there is ongoing litigation between the Federal Highway Administration (FHWA) and plaintiffs. Representative Burch asked how long it took to build the bridge in Owensboro. Secretary Hancock replied that it was built over three construction seasons.
Representative Clark asked if the federal government would need to approve the environmental update and if so, how long would it take to get that approval. Mr. Valentine replied in the affirmative, adding that the goal is to have it complete within the next year. Representative Clark asked if construction could be started prior to final approval. Mr. Valentine said no. Representative Clark stated that everything needs to be approved and in place before the General Assembly meets in January, if funding is to be discussed. Secretary Hancock said the cabinet should have a clear picture in January.
In response to an inquiry from Representative Jenkins, Secretary Hancock said the LSIORB project was approached with an eye toward future needs.
In response to a request from Representative Collins, Mr. Valentine explained that the $2.9 billion represents approximately $2 billion in Kentucky costs and approximately $900 million in Indiana costs. Secretary Hancock said the initial cost had been $4.1 billion. After deducting the cost for scope reductions, $250 million came from Indiana's share of the original $4.1 billion.
Chair Overly inquired about Kentucky's savings. Secretary Hancock replied that Kentucky saved approximately $900 million and Indiana saved approximately $300 million. In response to a question from Chair Overly, Mr. Valentine explained that the financial plan would be presented to the General Assembly by the end of this calendar year.
In response to a question from Chair Overly, Mr. Valentine replied that the Louisville Southern Indiana Bridges Authority (LSIBA) is working to establish toll amounts. Representative Collins asked if the tolls would be different on each bridge. Secretary Hancock replied that no decision regarding toll amounts has been made. Mr. Valentine added that there were different price ranges to be considered. Representative Collins wondered if a less expensive toll on one bridge would cause a traffic overload. Mr. Valentine stated that was a possibility. In response to a question from Representative Collins, Secretary Hancock said there were two other bridges in the immediate area without tolls: the Sherman Minton Bridge and the Clark Bridge on Second Street. They both are heavily utilized, so the amount of diversion to those two bridges is constrained by what they can actually handle.
Representative Clark asked if commercial trucks had been considered when conducting the environmental cost analysis. Mr. Valentine replied in the affirmative.
In response to a question by Senator Higdon, Secretary Hancock said everything would come together throughout the process of presenting the next Road Plan, and any use of dollars for highway projects would be shown in the Road Plan. Revenue sources would be identified. Senator Higdon asked if toll revenues would be used to retire the debt instead of coming out of the road fund every year. Secretary Hancock replied that the hope is to maximize the ability to use tolls as a revenue source. His hope is that tolls would pay a proportionate share, but it is too early to tell at this point. The cabinet is evaluating how current road fund dollars for LSIORB are moving forward.
Representative Owens thanked Chair Overly on behalf of the Louisville House Delegation for inviting them to the meeting. He then inquired about toll projections and what would happen if actual revenues do not meet the projections. Secretary Hancock replied that those are things to be determined. Some risk could be transferred to the builder, and if so, the costs would increase, or the state could choose to keep some of the risk.
Road Fund Update
David Talley, Branch Manager, Office of Budget and Fiscal Management, Transportation Cabinet outlined road fund revenues.
In response to a request from Representative Collins regarding constraints on revenues, Mr. Talley explained that in the 2009 Special Session, the General Assembly enacted a $25 million motor vehicle usage tax credit, the majority of which was used in fiscal year 2010. Some of the growth shown in 2010-11 was due to the absence of that tax credit.
In response to a question from Representative Ford, Mr. Talley said the Department of Revenue conducts a quarterly survey to determine the average wholesale price of gasoline, and the results are used to set the excise tax rate. Representative Ford asked if there had been any decreases in the past five or six years. Mr. Talley replied that in the second quarter of fiscal year 2011, three tenths of a cent in collections was lost due to a reduction in the average wholesale price.
In response to a question from Representative Collins regarding projected usage tax revenues, Mr. Talley replied that the average wholesale price changes quarterly.
In response to a question from Senator Higdon regarding electric cars becoming more popular, Secretary Hancock said the cabinet would have to determine how to offset erosion of the road fund resulting from loss of revenues. Representative Keene commented that he had been to Europe recently and noticed the same amount of traffic, but with smaller cars, and remarked that it would be a good idea to learn how Europe deals with the issue. Secretary Hancock agreed.
Road Project Update
Secretary Hancock stated that, at the conclusion of the presentation, staff would provide a handout to the members showing a project-by-project breakdown.
In response to an inquiry from Chair Overly regarding the cabinet's recommendation to the General Assembly, Secretary Hancock said the cabinet does not have a clear picture at this point due to bills moving through Congress. There will be another SAFETEA-LU extension deadline this fall, and the cabinet should have a clearer indication from Congress at that time.
In response to a question from Representative Collins, Secretary Hancock said the low bids are running about 19 percent below average engineering estimates.
In response to a comment from Representative Gooch, Secretary Hancock said the cabinet works with Area Development Districts throughout the planning process to better define projects before they get too far along.
Representative Couch expressed his opinion that subcommittee members should be notified when the Transportation Districts meet with Area Development Districts.
There being no further business before the subcommittee, the meeting was adjourned at 11:39 AM.