The American Recovery and Reinvestment Act came along just as traditional revenues for new roadwork were drying up in North Carolina and road lettings were being reduced to a small fraction of recent levels.

The North Carolina Department of Transportation has between only $15 million and $20 million available monthly for traditional lettings. That’s down 75% from 2008, when the state let $948.6 million in new contracts, or an average of nearly $80 million per month.

Revenues are down about 11% overall, but the highway-use tax, derived from vehicle sales, is down about 30% this year, says Burt Tasaico, state program analysis engineer for NCDOT, adding that the highway use tax primarily funds the highway trust fund account, which is used to pay for capital projects in the state’s transportation improvement program. 

“We have to ensure the monies will be there in the future to meet and pay contractors for the work that they have just performed,” Tascaico says. “It’s a balancing act between meeting the obligations that we know into the future and being able to obligate more and still meet our financial responsibilities.”

North Carolina’s long-term funding shortage is in the billions, Tasaico says. Resolving the funding problems will require additional revenue sources, such as increases to the fuel and highway taxes or other user fees associated with driver licenses or titles.

“It has a lot of implications, not only internal but external to the department,” Tasaico says. “It impacts every citizen on a day-to-day basis.”

Thanks to the stimulus, “We’re beginning to be a bit more optimistic,” says Berry Jenkins, North Carolina Heavy-Highway Division director for Carolinas Associated General Contractors in Raleigh.

The state will receive $838 million in federal funding, with $735 million designated for highway and bridge improvements and $103 million for aviation, transit and other modes of transportation. States must obligate half of the dollars within 120 days, and all of the money must be committed within one year. The federal government will give priority to projects that can be completed within three years and are located in economically distressed areas.

“North Carolina is trying to focus the projects on ones where North Carolina suppliers for materials can be utilized,” Jenkins says.

By June, NCDOT plans to let $466 million of the stimulus money to fund about 70 projects, the majority of which had been delayed or deferred due to funding constraints. The department considered more than $5 billion in potential highway projects, evaluating them for their ability to create and sustain jobs for a wide variety of industry partners throughout the state.
State transportation officials estimate this round of infrastructure improvements will create or retain about 14,000 jobs.

NCDOT has experienced an up-and-down work program over the past few years. For example, the department let $948.6 million in 2008, $1 billion in 2007, $666.8 million in 2006, $475 million in 2005, $1.3 billion in 2004 and $1.2 billion in 2003, according to department records.

In 2007, Steve Varnedoe, chief engineer for NCDOT, began using Grant Anticipation Revenue Vehicles or “GARVEE” bonds to finance jobs. Jenkins says GARVEE bonds have not created a problem for the agency, as it has used them judiciously to build large projects.

Currently federal revenue is holding at the same level or is a little higher than last year, says Laurie Smith, in the funds administration section of the NCDOT.

“We’re borrowing future dollars to hedge inflation,” Tasaico says. “We’re able to get the North Carolina motorist on the road, using the facilities, years ahead of schedule.”

However, in early 2009, Jenkins says, contractors were expressing some concern about NCDOT’s ability to pay on current project, especially a couple of design-build jobs that were ahead of schedule.

“Now, to the best we can learn, current projects being paid is not a problem,” Jenkins says. “And we don’t anticipate it is a problem.”