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Wed, 27 Oct 2004
(Submitted to the Providence Journal, but to no avail.)
In a recent Journal op-ed, James Capaldi, the director of our state Department of Transportation claims that all road construction in Rhode Island depends on passage of the transportation bonds on Question 3 this November. But he is being slightly disingenuous. Road construction will not halt if the $66 million in bonds are not approved; the construction lobby employs too many people around here, and too many of them have friends in the administration and in the legislature. But what will happen if approval is not granted is that the state may have to come up with a more sensible way to fund road construction.
DOT has been funding routine construction with bonds for years, which makes it seem normal. But it's not. Among all the states, we are the exception, not the rule in the matter of debt. Lots of states borrow for this or that big road or bridge project, but we borrow $30 million every year, except for the years in which we borrow much much more (like this one). Projections have us borrowing the same amount each year into the foreseeable future.
The question is why? If we're borrowing $30 million every year, then there's no need to amortize, it's already amortized, at $30 million a year, and we should just budget for that. Roads are a kind of investment, but not one with returns--especially not roads built to replace existing ones, which is what most of the next decade's cost is for. Constant borrowing like this is a perfectly common financial strategy, but one that often ends in bankruptcy court.
The history of DOT's debt is a long one, started probably in the Garrahy administration, when a resort to borrowing was an easy way to avoid facing the true cost of the department. But successive Governors have made the problem much worse through malign neglect.
In the past ten years, DOT has dropped over 100 employees, and the amount of money it spends on construction has gone up very little: from $95 million in 1994 to $102 million in 2005. Maintenance activities over that same period have only gone from $26 million to $39 million. During that same time, federal highway funds, though they vary a lot from one year to the next, have roughly tracked inflation, going from $149 million to $207 million. But state dollars (DOT's budget minus the federal dollars, minus the money they pass along to RIPTA) going into the department have skyrocketed, going from $56 million to $104 million. We're getting a lot less for our money than we used to.
There are lots of little reasons for this--inflation, health care costs, pension adjustments--but the biggest reason is that DOT's budget is struggling under around $50 million in debt service, roughly double the $27 million from 1994. (Part of the debt service is accounted in the Department of Administration, but it's DOT's debt and is paid with gas tax money.) That is, at least half of the increase in state money applied to DOT goes to debt service. It would be much more, but for the serendipity of the tobacco settlement money, much of which was spent paying off DOT debt.
Mr. Capaldi will object that the amount of construction has actually gone way up, since last year we sold $216 million in GARVEE bonds, to be paid off with future federal highway money. This is the money going to build the access highway and freight rail to Quonset, the new Providence River bridge for I-195, and the new Sakonnet River bridge for Rt. 24. In one sense he would be correct. But construction on those projects doesn't do much for the bridge rotting away down the street from me or the intersection that needs signs near you. Nor does it do anything for the projects Mr. Capaldi lists as "likely" to be scheduled. The GARVEE bonds planned will require that one-third of the federal highway money we receive each year goes to their debt service for the next fourteen years. The DOT situation is like a family that's bought a house slightly too expensive for them: At best, they won't be eating a lot of steak in the next few years. At worst, they won't keep the house. We may finish those four projects, but all other construction is at risk for the next several years.
Six years ago, 36% of the gas tax collected went into the general fund, to fund state services like local education aid and protecting the environment. Today less than 7% goes to the general fund, a drop of more than $40 million in today's dollars. That sure would have been useful in last year's budget battles.
Mr. Capaldi knows all of this. In fact he was the one who explained it to me several years ago. But that was before he was running the department. It's not his fault that the Governor and the Legislature won't allocate the money necesary to fund necessary road construction, but he knows full well that debt isn't the only way to fund DOT, it's just the worst way.
Vote no on question 3, for saner state spending.
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