Now is the Time for a Gas Tax Increase in Tennessee

Nothing can get people hotter under the collar faster than talking about tax increases. Most people feel their budget getting stretched every pay day. Myself included.

So why would I dare to talk about such a taboo idea? Because it is that important.

From my observations, the real reason behind most people’s frustration  with taxes or tax increases is because they feel that their money will be wasted. Wasted on programs or policies that they don’t support or agree with. Usually these are things that they can’t see or that happen far away from them.

Investing in roads, bridges, and transportation infrastructure is different. Everyone in this Country has a stake in the transportation system. It doesn’t matter if you drive, or use public transportation or not. Our economy is totally connected through our transportation system. The food you buy in the grocery store, to just about any job or employer is somehow linked through our transportation system. If you don’t think that companies (or people) select new locations based on the local transportation networks, you are sorely mistaken.

Here is the deal. Due to a whole range of factors, which include improved vehicle fuel economy, and changing driving habits, gas tax revenue has been flat or falling. This is the main source of revenue on both the State and Federal sides of the funding equation.

Hint: The price of roads, bridges, airports and other transportation projects has not been flat or falling. Construction costs have been rising at about 12%-15% per year.

So the cost of repairing, let alone building new roads or bridges has been rising, and the funding coming in has been flat or falling. TDOT and County Highway Departments have been trimming and cutting their operations for years. The are fast approaching the breaking point where they won’t be able to maintain the stuff they have. Many County Highway Departments are already there.

As you may have noticed this winter, the price of gasoline at the pump has fallen quite a bit (Thank You Saudi Arabia!). You don’t have to be a genius commodities trader to know that won’t last forever. This gives State legislatures a unique opportunity to do the right thing and raise the gas tax. Here are a couple of reasons why I think that now is the time:

  1. Everyone agrees that a new, fully funded, 4 year transportation bill that addresses  all of these needs and has a way to increase (not just keep the same levels as 4 years ago) revenue is the real answer to the problem. Everyone also agrees that Congress and Washington are in general gridlock and that there is no chance of this happening anytime soon. This is why I think the States (especially my state, Tennessee) need to take the lead now.
  2. Increasing the gas tax when the price of gasoline is at it’s lowest in years is the best time to do it. People won’t like it, but you can sell them on the benefits of better roads and bridges. It doesn’t sting as much.
  3. You can pay, or you can pay. I learned a long time ago that I could either pay for maintenance on my car, or I could wait until the engine blew. Either way you have to pay for work on your car. Oil changes are much cheaper than blown engines. Transportation infrastructure is much the same. It is a lot cheaper to plan for a bridge replacement than to wait until if falls into the creek.
  4. More spending on transportation infrastructure would help to improve the economy. Where do you think that this spending would go to? It goes to engineering firms (like mine), construction firms, contractors, surveyors, ect. You could get a lot of people to work in a relatively short period of time.
    Improved roads help the economy in other ways. There are some heavy equipment manufacturers that have to send their products far distances out of the way because the roads and bridges between “point A and point B” can’t handle the load. This ends up costing everyone. Examples like this are endless.

Just raising the gas tax alone may not be the best solution. With electric vehicles and improved economy we may have to look at new revenue models such as mileage use taxes. I won’t even get into long term improvements in rail and public transportation. Those are whole other subjects unto themselves.

Raising the gas tax won’t solve all of our problems overnight. In Tennessee it would allow TDOT to get several important projects that have been pulled from construction back and going again. It would possibly allow County governments to resurface 5 miles (most Counties are responsible for 300-500 miles of road) instead of only 3 miles of roadway.

It would be a good start in the right direction.


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TDOT Accelerated Delivery Pilot Program

The TDOT Local Programs Office has rolled out a new program called the “Accelerated Delivery Pilot Program”. You can find out more information on it from the TDOT website here:

Up until now TDOT, through the Local Programs Office has only had two ways to fund a project:

  1. TDOT Managed: With this process the local government signs a contract with TDOT. It is TDOT (through staff and consultants hired by TDOT) that handles everything from the Environmental document through design plans, and all the way through construction.
    The only thing that really makes it a “Local Programs” project is that they local government must use it’s STP balance, and contribute a local share (usually 20%) to the project. All the local government does is sign a contract with TDOT and periodically send TDOT checks to cover their percentage of the project costs.
  2. Locally Managed: The local government still signs a contract with TDOT, but they now control much of the responsibility of moving it forward. The local government hires it’s own Engineering Consultant firm (as per TDOT policy) who then does all of the things that TDOT would do in moving the project forward.
    It’s your consultant firm that gets the approved environmental document, that gets the plans approved by TDOT, that gets the permits/ROW/Bid book/Utilities/Estimates certifications from TDOT. There is a back and forth with between your engineering firm and TDOT the whole way to get these certifications. There are stopping points where TDOT must concur, and get additional funds obligated before moving between phases.
    From the local governments perspective, they have to be more involved. They have to oversee the work of the consultant, and more importantly, it is the local government who is writing the checks to the consultant, and later to the contractor for the project. Every month the local government then turns around and submits reimbursement requests to TDOT to get paid back for their expenses (minus any local share).

So, now TDOT is opening a third way with the Accelerated Delivery program. As it has been explained to me through the webinar and conversations with TDOT, everything through the approval of the NEPA document is just the same as the regular local programs project.

Once you get your approved NEPA document, that is where everything changes. Rather than getting Notices to Proceed (NTP’s) for PE-Final Design, Right of Way (ROW), and only after several reviews, Construction, you will just get a NTP for Construction.

You will still be responsible for following all of the correct TDOT process, but you will not get approvals along the way. Instead, you will follow the new Chapter 11 guidance in the Local Programs manual, complete the whole project including construction, and only after the project is totally completed will you schedule a review with the TDOT Local Programs Office. At that time TDOT will look at what you have done, how you have done it, and then, and only then determine if they will reimburse you for the project. Up to that point the local government has been floating the project expenses of engineering, construction, and TDOT oversight bills.

I applaud TDOT for looking at new ways to help local governments move their projects faster. However I have some real concerns about this process:

  1. Local governments have a hard enough time floating the month expenses of a project. Reimbursement can take from 45 to 180 days. This process would have a local government floating the project for 10 months to over a year or more, and that does not include the review process, and the reimbursement process once it is approved.
  2. This is a lot of risk for a local government, or an engineering/consultant firm to take on. TDOT requirements, and personnel are always changing. What happens if, even through the best due diligence, you get things wrong? Will TDOT not reimburse for the project? I can see bad things happening very quickly for everyone if this happens.
  3. Bottom line, I don’t see how this will speed things up. I have been working on projects that follow the TDOT Locally Managed program process from when the program got off the ground in 2006. ROW certification takes time. Design plans take time. Utilities certifications take time. All of these things take time to get completed. This new process does not say that you don’t have to do these activities, it just says that they will be reviewed at the end of the project, instead of during it.
    At the end of the day, when the dust settles, I don’t see how this process will actually save any time, or money.

Now please don’t take this the wrong way. Nobody is a bigger fan for TDOT and the Locally Managed process than I am. It is a great program, that even with it’s flaws, gives the local governments a great way to save time and money on their projects. Depending on the circumstances I am also a great believer in the TDOT managed process. It takes a little longer and you lose some control, but the TDOT managed route can be the best way to move forward.

I am also a big fan of the TDOT Local Programs Office, where I used to work. My biggest fault with them (and I have told them this) is that they are under-staffed and need more experienced people up there. I think that is something that they would agree on.

At this point I can’t recommend the Accelerated Delivery Program. I think that the best way to help move TDOT Locally Managed projects forward faster would be for TDOT to hire and train more staff. They easily need to double the amount of people up there.

We shall see how this new process works out. I could be totally wrong about it and in a year be writing a post on this blog “eating crow”. I am fine with that, it wouldn’t be the first time.

Please keep in mind that all if this is just my opinion and nothing more.

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How to Fund a TDOT Local Programs Project

Things have been busy in the Local Programs world for the past month. We just had another very successful workshop last week in our Jackson, TN Office. As with all of these Workshops some questions and issues  seem to come up again, and again. One of the biggest questions seems to be:


We are working with several rural Counties with Federal Off-System Bridge (BRZE) projects that are going to be $1 million plus projects. Even if these County Highway Departments could cash flow the engineering bills, what about when these things hit the Construction Phase? It would not be unexpected to get a $100,000, $200,000 or maybe even $300,000 bill for one month. Even if TDOT turns around the reimbursements in 30 days, that is still 30 days that the County has to “float the note” for that large amount.

The good news is that there is an answer already out there. It is called the Tennessee Municipal Bond fund.

You can go to their website here or call them at:

226 Capitol Blvd, Suite 502
Nashville, Tenn 37219
Phone: 615-255-1561

I have spoken with representatives of the Bond Fund about this very situation, and they can help. They can set things up so that you are writing checks for the project out of a loan, not your operating budget, that gets paid back when TDOT pays you back.

This is not a new thing. The Tennessee Municipal Bond fund has run loans for just about every City and County in Tennessee since 1985. You will have to get approval from the City council or County Commission for this. But consider this is not a long term loan. The most a Local Programs project will go on for is a year or two. Once the TDOT project is closed out, and you have gotten all of the reimbursements back from TDOT, then the loan will be paid off. The loan costs, including interest are going to be very low.

Remember that with a TDOT Local Programs project you are sending in monthly reimbursement requests. You don’t wait till the end to send in one or two big billings.

Full disclosure: Neither A2H nor I have any financial interest in you using the TN Municipal Bond fund. This is just a great tool that can help you get your project done with the minimum amount of headache.


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Funding Deadlines: What do they mean?

There are 52 communities in the State of Tennessee that have populations between 5,000 and 50,000 that receive a “Small Cities” Surface Transportation Program (STP) balance from the Tennessee Department of Transportation (TDOT). The way that Congress sets up the funding through the most current Highway Bill, communities that receive this funding have a deadline to spend this money.

With the most recent Highway Bill, the deadline for obligating funds in September 30, 2014. But what does that really mean?

As I have said many times before the word “obligate” in the TDOT Local Programs world means something very specific. It means that you have a project set up with the TDOT Local Programs Office, a fully executed contract for that project, and most importantly, a Notice to Proceed for that specific phase of work has been issued. Funds are obligated for each phase of work, not all at once. You can’t have your funding for the Construction phase obligated until you complete all of the steps in the TDOT process.

Now back to the idea of funding deadlines. If a local government does not have their Small Cities STP funds obligated on a project by the September 30, 2014 deadline then they will disappear (the MPO funding deadlines are a little different). TDOT will not allow you to roll forward any balance. It is a use/lose proposition.

But does that mean that you have to actually spend the funds that have been obligated by the funding deadline? The answer is no. Once the funds have been obligated for a project, they are essentially taken off the table, and are about as safe as you can get (as long as you are submitting monthly reimbursement requests to TDOT). Funds that are obligated before the deadline, can be spent on the project after the deadline has passed.

Note: In every single TDOT Locally Managed contract, every project has a drop dead date (its on page two, section B.2). TDOT gives you about 4 years to complete your project. At that time the contract on the project expires. Technically you  could do a contract amendment to change that date further out, but you had better have a good reason to give TDOT for needing to do that. 

Now back to this idea of the September 30, 2014 deadline. It takes time to get contracts set up with TDOT. It takes time to get funds obligated with TDOT and the Federal Highway Administration (FHWA). Getting a project set up can take 4 to 6 months easily. Also keep in mind that TDOT has to start closing out it’s books with FHWA ahead of the deadline. That can complicate getting the funds for your project obligated the closer to the deadline that you get.

So if you think that you can wait until August or September to submit the paperwork for your project and you are ok…Well, I hate to break it to you but that is not the case.

It is my deepest hope that Congress has the wisdom to fully fund a comprehensive four year Highway Bill. That would put the next deadline at September 30, 2018. Considering how long it can take to get a project to Construction, my advice is to get going as early as possible on your project. Four years can sound like a lot. That is until you start looking at a calendar, mapping out schedules, and taking unforeseen project delay’s seriously.

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Important Funding Information

So you have gone through the whole TDOT Local Programs process for your project. You have the approved NEPA, your plans approved, all the certifications, a Notice to Proceed for Construction, and at long last, bid concurrence from TDOT.

Goodness knows how long this has taken you, and how much work you have had to put in to get to this point. This is where things can get very dangerous, very quickly. NOW is the time to check the math on your fund balance and make sure that there is enough funding to cover the project, and any contingencies that may come up in Construction.

Let me explain. Every project has two separate funding numbers to watch:

  1. #1 How much money has TDOT obligated for ALL phases (PE-NEPA, PE-Design, ROW, Construction) for the project? Is this the totality of what your community has available or are there additional funds (STP, Local, or other) that can be put on it?
  2. #2 How much money is the project going to cost (at this point)? To get this add the total contract amount (which should include PE-NEPA, PE-Design, ROW, and CEI) with your engineering firm, any materials testing that will be needed, plus the approved bid amount.

If the total amount for #2 is greater than #1 than you have a problem. That means that the local government will run out of TDOT funding and have to pay everything out of pocket after their funding balance runs out.

If the total amount for #2 less than but is very near to #1 than you need to watch any sort of cost overruns, or change orders closely. You could quickly run out of funding. TDOT is going to  be keeping a close eye on this as well.

Note, you can move obligated funding between phases of work. So lets say that TDOT obligated $40,000 for PE-NEPA, but your contract with your engineering firm is only for $20,000. The NEPA is completed, and your engineering firm has sent you all the bills for NEPA that they are going to send (and you have paid them and been reimbursed by TDOT). At that point you would want to ask the TDOT Local Programs Office to move the remaining $20,000 from the NEPA phase to the Construction phase.

The math on this may be fairly simple, but if you are only watching one of the two sets of numbers then you can get in very big trouble. You must keep an eye on both, and make sure that everyone (Consultants, TDOT, your Contractor, and most importantly the Local Government) understands them as well.

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“D List” Categorical Exclusion NEPA Documents

Up till now the only Environmental Documents that I have worked on are Programmatic Categorical Exclusion (PCE), or “C-List” Categorical Exclusions. Both of which take the same amount of effort and require the same information. I have gone into more detail on how this process works in previous postings.

Well, I have a few small Federally funded Bridge Replacement projects that I am getting NEPA documents for. Even though they are smaller bridges, TDOT is interpreting the guidance from FHWA to mean that they will need to be processed to the higher level “D-List” standard.

So what does this mean? Basically it means that one additional step is added to the process. With  a PCE or C-List once TDOT has signed off on it the NEPA document is complete and approved. You are done.

With a “D-List” you have to go through all the same things, but once TDOT signs off on it, it then gets sent to FHWA for approval and signature. Once FHWA signs off on it THEN your NEPA document is approved.

The final SDC document is set up a little different than the PCE/C-List document, but from the perspective of the person putting everything together all is the same. Be sure to contact Drew Gaskins at TDOT NEPA to make sure you have the correct form before filling it out.

If you have more questions please contact Drew, he will definitely be able to help you. If you are curious to find out more about D-List projects you can go to the FHWA website and find out more information.

I have been told that FHWA has 30 days to approve the D-List projects. Mine were sent over last week, so I will find out soon enough how long it actually takes….

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Another Updated TDOT Document

Just as I posted the updated SHPO 106 memo template it turns out that the SDC template has also been updated. This is the final NEPA document that you send in for signatures and approval after all of the Agency letters come back approved for your project.

You can find the new template here SDC, version 3, May 2014

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