Funding for “major new capacity projects” with the Ohio Department of Transportation (ODOT) are awarded through the Transportation Advisory Council (TRAC). Applications for TRAC funding were due on July 31, 2017, and 13 projects filed for a total of $280 M. The Ohio Transportation Budget, House Bill 26, recently enacted allocated $59.5 M in funding for Major New Program funding per year in the FY 2018-FY 2019 biennium, considerably less than the amount spent in this area during FY 2017. The high demand for state transportation funding will create substantial competition through the TRAC process as well as interest in exploring alternative P3 funding options.
While the number of TRAC applicants is down the loss of the Ohio Turnpike proceeds for major new highway construction projects has dropped the funding allocation for TRAC projects by two-thirds the previous total (as illustrated by the chart below). In fact, the Cuyahoga County I-90 bridge project awarded TRAC funding in 2016 cost more than all the current TRAC applications put together.
First, communities hoping to gain funding for their transportation project through the ODOT TRAC process need to fully implement a project financing program. Successful project financing strategies will involve advocating aggressively for TRAC funding, increased ODOT support for the TRAC budget, forming Transportation Improvement Districts (TIDs) and alternative funding sources from private infrastructure financing through Public-Private-Partnerships (P3s) and EB-5 funds.
Highway transportation project financing needs to start with efforts to gain TRAC funding. TRAC funds Major New Capacity projects greater than $12 million which increase the capacity of a transportation facility or reduce congestion, impact economic development, have local financing and a strong overall financing plan. All projects that cost ODOT greater than $12 million, request Major New funding, and add capacity to a transportation facility must come before the TRAC. This definition includes all new interchanges proposed for economic development or local access, any significant interchange modifications, bypasses, general purpose lane additions, intermodal facilities, major transit facilities, or Intelligent Transportation Systems (ITS). TRAC put out specific limiting criteria for this round of funding focused on projects with non-ODOT funding commitments in the amount of 30% or greater of the total project cost and:
- Projects that are an existing TRAC funded project (Tier I, II or III) and additional funds are needed to advance the project to the next stage of development; or
- new projects that demonstrates significant impact to jobs, regional economic impact and has significant non-ODOT funding commitments.
ODOT Program Management Staff reviews the applications submitted and scores applications in accordance with TRAC policy to provide a draft project score based upon four factors- transportation, economic, local investment and project financing. Draft scores are shared with project sponsors to determine if any additional information is needed. Once a final score has been assigned, ODOT Program Management Staff provides the information to TRAC for their evaluation and consideration. Also, the TRAC will hold public hearings around the state in September and October, providing project sponsors with the opportunity to convey information about their respective projects that may not be captured as part of the on-line application process. After the public hearing process, TRAC will develop a DRAFT funding list which is published for public comment. Once public comment has been received and reviewed, TRAC will move to adopt a FINAL Major New Construction Program Funding List. From application submission to adoption of a FINAL Major New Construction Program Funding List is approximately six months to allow for sufficient time for review, questions, and public comment.
The fact is TRAC is not allocated the funding it needs to support all the applications filed. In fact, the TRAC applications nearly total the entire highway construction budget for ODOT. TRAC funding could be support by additional funding from the Ohio Turnpike Commission. ODOT is planning on $250 million in Turnpike infrastructure bond funding in the Major New projects area in FY 2019. Additionally, ODOT has pursued the financing of large Major New projects through P3 agreements in recent years. This has led to the private financing and building of the Portsmouth Bypass, estimated to cost $1.2 billion. This financial arrangement allows the state to make payments over a negotiated period of time, reducing the amount of upfront outlays needed to pay for these types of projects. P3s are driven by global private infrastructure companies that fund highway construction projects. The Portsmouth Bypass proves they will work in Ohio and P3s are an option for major highway construction projects.
Forming a Transportation Improvement District (TID) could also provide additional major highway financing options. Multi-local governmental entity reaching agreement on funding for a specific transportation project. TIDs fund improvements to streets, highways, parking facilities, freight rail tracks and necessarily related freight rail facilities, or other transportation projects that are newly constructed or improved as well as the administrative, storage, and other buildings or properties, and facilities the district needed for the operation of the TID. The recently passed ODOT budget has funding for TID projects but it is capped at $250,000 per project. However, TIDs ability to develop local financing options through a multi-jurisdictional revenue model offer substantial funding sources.
Finally, major transportation projects have been funded by EB-5 funds in Pennsylvania that may provide a new model for transportation funding in the Buckeye state as well. Entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a green card (permanent residence) if they: make the necessary investment in a commercial enterprise in the United States; and plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers and transportation projects have qualified for EB-5 investments as construction jobs qualify as job creation. A major interstate project in Pennsylvania was funded through the use of EB-5 funds and may provide a model for major highway financing for Ohio projects searching for funds.