News

McGrady dubious about NCDOT bailout

By Brooke Conrad, Carolina Journal News Service, Published: October 25, 2019

RALEIGH — Some House members want to give the N.C. Department of Transportation an emergency bailout.

The DOT is running out of money after hefty expenses in recent months. As a result, the House Transportation Appropriations Subcommittee voted Wednesday, Oct. 23, for two major funding initiatives, in a revamped version of H.B. 967. Some say the funding is necessary to avoid laying off 500-600 workers and delaying 900 different projects. Others suggest the funding issues resulted from poor management decisions.

First, the bill would transfer $360.2 million from the state’s general fund to help DOT cover Map Act settlements — long overdue payments to landowners whose properties were drawn into corridors for future roadways. Second, they approved a $301 million loan from the state’s savings reserve fund to help with projects delayed by pre-Dorian hurricane expenses.

Rep. John Torbett, R-Gaston, vigorously endorsed the funding, saying the DOT did its best to cover the costs as soon as it was obvious the funding would be depleted. Most other members also backed the bill.

Rep. Chuck McGrady, a Hendersonville Republican, questioned why no one had addressed the funding crisis earlier.

“I do wonder why N.C. DOT put its foot on the accelerator earlier this year when it knew it had a Map Act problem and knew it had disaster relief issues, and yet we put our contractors in the position they’re in,” he said.

McGrady raises a good point, wrote Joe Coletti, a senior fellow at the John Locke Foundation. Last year, the General Assembly allowed the DOT to borrow $300 million a year in Build N.C. Bonds over the next decade. The catch? The department couldn’t have more than $1 billion in average month-end funds during the first three months of the year. So DOT simply accelerated spending in order to receive the bonds, Coletti writes.

McGrady added that no other agency currently gets a cash advance from the Rainy Day Fund.

“Why is that this agency, unlike the education department or agriculture or the justice department, gets a free pass?” he asked. “There’s a serious public policy issue with the bill.”

Committee Chairman Rep. Frank Iler, R-Brunswick, countered that the bill isn’t the “blank check” some purport it to be. The General Assembly still has to appropriate the funds, he said.

Rep. Sarah Stevens, R-Surry, noted there were already reserves set aside to address the Map Act problem.

That’s partly true, said Bobby Lewis, DOT chief operating officer. The problem is, the court’s ruling in 2016 never actually defined “just compensation.” So DOT couldn’t actually calculate the costs until all the individual land settlements were finalized. The agency also had to pay 8% compound interest from the time the land was taken. That includes, for example, $40 million on the Raleigh 540 loop and $12 million on the Fayetteville loop for each year’s delay.

Regarding hurricane damage, Torbett said an earlier infusion of cash from the General Assembly wasn’t enough to replenish the department’s withering coffers. It simply delayed laying off contractors.

To avoid more layoffs, the department would need more than $600 million, Torbett said.

“If it had not been for the expense of the hurricanes and expense of the Map Act, we would not be having this conversation,” he said.

In the past, the DOT handled storm relief through internal budgeting, setting aside an average of $66 million every year between 2004 and 2016. But between 2017 and 2019, costs escalated to an annual $222 million, Torbett said. If the department accessed the Rainy Day Fund now, the federal government would later reimburse the fund through FEMA and Federal Highway Administration money. This would make the transfer akin to a “loan,” Torbett said.

On top of the two major expenses in recent months, the department’s regular projects cost more now than they did 10 years ago, he added.

“Anyone with business sense knows that in a better economy the costs are higher,” he said. “You have everyone working full-steam, so they’re charging higher premiums than in a soft economy where there’s not as much going on.”

Torbett said more than 30 other states use money from their general funds for transportation expenses, so the situation isn’t a “rarity.” But McGrady warned committee members the bill signals a “significant policy change” and would set a bad spending precedent.

The General Assembly has a little more than a week to vote before the likely end of the session.

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