Walker DOT wants to blow extra highway $$$ on Foxconn, letting rest of the state crumble

I admit to being surprised to see the Joint Finance Committee planning to take up discussion tomorrow about what to do with the added amount of money that the state DOT has received from Uncle Sam. And in between some interesting money-shuffling and a one-time needed boost to fix bridges, Most will go to build up I-94 near Foxconn (and what a coincidence, Donald Trump is coming to Wisconsin for a photo op and fundraiser later this month!), and it'll go beyond the Trump Administration's earmark.

Interestingly, Scott Walker’s DOT was required to send a plan over the JFC, but not due to the $160 million grant given for I-94 work near Foxconn and the rest of the southeastern corner of Wisconsin (we’ll talk about that in a bit). Instead, it's because the state will get $67.4 million above what was state budgeted for its “regular” highway aid. JFC co-chairs John Nygren and Alberta Darling figured they would handle both issues all at once, and that’s why they’re meeting tomorrow.

The Legislative Fiscal Bureau explains the extra money and the plan as follows.

…The $67.4 million includes (a) $7.9 million in additional federal formula aid; (b) $37.5 million in additional approved in the federal Transportation Appropriations Act, which became law on March 23, 2018; and (c) additional federal redistribution aid of $22.0 million, for a total federal redistribution aid for 2017-18 $66.4 million (the amounts shown in Table 1 includes an estimated $44.4 in federal redistribution aid, which is any unobligated or unallocated federal aid that is authorized to be appropriated for federal aid highway programs for given a year that the Federal Highway Administration (FHWA) is required to redistribute to the states). The state has until September 30, 2018 to use the $7.9 million in additional federal formula aid, until September 30, 2021 to use the $37.5 million in approved in the federal Transportation Appropriations Act, and until the end of the 2017-18 state fiscal year to use the $22.0 million in federal redistribution aid.

So the additional $67.4 million will be used in the following manner.
1. $37.4 million to I-94 South by Foxconn
2. $30 million for other highway projects in the state
WHICH REPLACES $30 million of state funding for other hwy projects (net effect on state highways- $0)
3. That $30 million in state funding becomes added funds for bridge replacement.

More money to help clear a backlog on bridge work is a very good thing, and will be a welcome relief to local communities that haven’t been able to pay for those repairs themselves. But the flip side to that is that the underfunded State Highway Rehabilitation (SHR) program for non-SE Wisconsin projects doesn’t get any help from these extra funds, and the LFB points out that this may be an issue.

…during 2017-19 budget deliberations, DOT prepared several highway condition analyses, one of which showed that over a 10-year period, the biennial funding level recommended by the Governor ($1,701.6 million), with no inflationary increases, would result a decline in highways rated at fair and above to 61.7% (by the end of 2027-28). If the $1,619.4 million in SHR funding provided under Act 59 (4.8% less than the Governor's recommendations and 4.6% less than the 2015-17 biennium), were held constant over time, an even greater decline state highway conditions could be expected to occur over the same 10-year period. Given these demands on both state transportation infrastructure and the limited state resources currently available to meet those needs, one policy concern that the Committee may want to consider in reviewing this request is whether the state can afford to again increase funding for a local bridge improvement assistance program at a time when the state is having difficulty funding the state's transportation infrastructure needs.

Yeah, that’s a legitimate question, but the bigger one to me is why the Walker Administration wants to use $37.4 mil of these extra funds to finish off I-94 South, which is already getting extra help with that $160 million grant. Even more bizarre is that the Walker Administration claims that not using that $37.4 mil (less than 2% of the $2 billion project) would delay I-94 South by another 2 years! (cough-BULLSHIT)


If you don't live near Foxconn, this won't change anytime soon

So that’s about half of the $86 million gap that still existed after the federal grant was announced last week. How else is the Walker Administration going to get all of I-94 South’s lanes open by Summer 2020? The answer lies in a scheme that “cashes in” some money left over from borrowing less than what was in the budget.

The residual bonding resulted from DOA issuing less revenue obligation debt in 2017 than was anticipated during the 2017-19 budget deliberations, which resulted in a larger than anticipated amount of bonding authority being carried into the 2017-19 biennium. In most biennia, a certain amount of "unbudgeted" or "un-programmed" bonding is carried over to the subsequent biennia, so it can be available to be issued in order to provide funding continuity for the major highway development program funding during the construction months in the event of a delay in the passage of the budget. During the 2017-19 budget deliberations it was anticipated that approximately $38.1 million of this bonding authority would be carried over into the 2017-19 budget, and would be available for issue in the event the 2019-21 budget would be delayed. However, due to the slower than anticipated bonding issues to close out the 2015-17 biennium, approximately $86.3 million of this bonding authority was carried into the 2017-19 biennium. DOT, using its current law authority can request DOA to increase its SEG-S, all monies received continuing appropriation (an appropriation that expends the bond proceeds) in the majors program in order to expend any bond proceeds available in the transportation revenue bond program that have not already been appropriated.

This basically reduces the amount that can be borrowed, and allows $48.6 to be paid in “cash” instead. Sounds good, but the drawback is that it means more will have to be taxed or borrowed at a later point to make up this difference.

Likewise, the Transportation Fund has an extra $51.4 million that is usually designated for paying off and reducing debt in the future, and the LFB says the Walker Administration may use that as a source of funds for the rest of I-94 South. The answer why goes back to the “bond teeter-totter” concept you should have learned about in high school.

In addition, the administration also indicates that approximately $51.4 million in excess bond proceeds associated with the two most recent transportation revenue bond issues also exists. These proceeds are associated the premiums received on those bond issues. Over the past decade or more, the state sold bonds with coupon rates that are above market rates at the time of the sale. In return for having to repay the bonds at the higher coupon rate, the state receives upfront funds (premiums) that are deposited along with bond proceeds into the transportation revenue obligation fund. Despite the above market coupon rates, when factoring in the up-front premiums, the state's true interest cost associated with the borrowing is still less than if the state issued bonds with market rate coupons. If that were not the case, the state could simply issue bonds at the market rate. Similar to the appropriation of bond proceeds from the issuance of the $86.3 million in authorized but unissued bonding, DOT can request that DOA increase the same majors program, SEG-S, all monies received, continuing appropriation in order to expend these available bond proceeds in the majors program.

Of course, cashing in those bond premiums means these funds can’t be used to pay off those higher interest payments that the Transportation fund has to pay off in coming years. In both cases, the Walker Administration seems to be trying to scrape together one-time sources of money to pay bills now, and will worry about taking care of future needs at a later date.

That may not necessarily be a wrong approach, but it does seem telling. And the bigger question is “Why is even more money being sent down to I-94 in the Foxconn-sin region?” Meanwhile, main highways in every other part of the state are crumbling and local governments are struggling to fix their own streets because of the Legislature’s strict property tax limits (although the bridge money will help some, as noted above).



The LFB also reminds us that the Walker Administration has already taken away highway funds from the rest of the state to bulk up roads near Foxconn, and that the already-bad situation for outstate highways is set to get even worse as a result.

Subsequently, this office determined that let savings on SHR project bids to date in the biennium could replace $32 million of the estimated $102.0 to $122.0 million in SHR funding to be used to reconstruct state and (previously) local roads near the Foxconn development. Therefore, after accounting for SHR program let savings, the previously unscheduled Foxconn-related roadwork is likely to reduce the amount of SHR program funding for previously anticipated SHR projects throughout the state by $70 million ($102.0 million -$32 million) to $90 million ($122.0 million -$32 million) in the biennium.

The use of any SHR program funding for previously unscheduled Foxconn-related local and state highway work will also impact the overall backlog of SHR roadwork, which can be measured by the estimated decline in the condition of state highways. As noted earlier, even at the higher amount of biennial rehabilitation program funding initially proposed by the Governor ($1,701.6 million), state highway conditions would be expected to decline substantially over a ten-year period, assuming a constant funding level. Estimates by the Department during 2017-19 budget deliberations indicated that funding in excess of $2.4 billion per biennium would be needed over a 10-year period to maintain (prevent a decline in) current state highway conditions. Given the expected deterioration of state highway conditions, this use of SHR funding for completing work on roads that were previously under local jurisdiction or for advancing state highway work related to the Foxconn development has further limited the SHR funding available to make needed improvements to state highways throughout the state.

Let’s see if the Republicans on the Joint Finance Committee rubber-stamp the Walker Administration’s plans to use all of these one-time sources to give even more money to the Foxconn-sin region, or if they modify the plan to actually have the Wisconsin DOT deal with transportation for the entire state of Wisconsin. If they do go along with this DOT plan to send almost all of the extra money to Foxconn, and want to wear that albatross proudly, I’ll gladly let them.

And no matter what is decided tomorrow, it’s obvious that Walker and WisGOP are trying to keep our road funding (and our roads) together with glue and baling wire, instead of shoring up the foundation with stable revenues and adequate funding to take care of our many needs. And it’s a big reason why Thursday’s meeting needs to be one of the last requests the Walker Administration is able to make to a GOP-dominated Joint Finance Committee.