A financial reckoning is here for Washington’s transportation system.
Contract prices to build roads, remove culverts and overhaul ferries continue to soar due to a confluence of factors: inflation, supply chain woes, worker shortages and fewer bidders. One contract alone, to construct new express lanes and bus rapid transit stations on a stretch of Interstate 405 in Bothell, will cost the state $250 million more than anticipated.
The bill for pretty much every undertaking is upwards of 30% more than state Department of Transportation estimates. In many cases, the amounts earmarked in the state transportation budget or funding packages are not enough to cover the tab.
It’s forcing lawmakers and the governor to ponder tough choices – forgo projects, delay some to pay for others, find new sources of revenue, or all three.
“Across the board, the conversation in the next session is going to be the higher costs,” said Sen. Marko Liias, a 21st District Democrat who chairs the Senate Transportation Committee. “Every one of our larger projects that still have contracts to be issued are going to be higher.”
The escalating expenses began during the pandemic but show few signs of fading. Bids awarded this past month for two major projects demonstrate the magnitude of the growing financial challenge for the state.
Only two firms sought the Interstate 405 work and the final bid was nearly 59% over state estimates.
It came in so much higher than expected, Transportation officials had to ask leaders of the House and Senate transportation panels to approve the award. The lawmakers did, knowing they must now find the extra $250 million somewhere.
A similar situation nearly occurred on the deal to convert three vessels in the Washington State Ferries fleet to hybrid electric power and replace each of their aging propulsion systems.
The successful bid of $150 million was 40% above estimates, which could have triggered a call to those same lawmakers.
However, in June, when it was clear final bids would be well above state engineer estimates, ferry officials pivoted, committing to pay for two boats with an option for the third. The move pre-empted a need to get legislative sign-off and bought the agency a couple years to find dollars to do the third boat.
Rep. Andrew Barkis, R-Lacey, ranking Republican on the House transportation panel, said contract costs exceeding budget amounts are “becoming the norm.”
“We really did our homework to determine what we needed to appropriate to get the projects done,” he said. “But the Department of Transportation keeps coming back telling us bids are up 40% to 60% and here are your options.”
On the I-405 project, he said, “Yes, we need to move forward to keep this on schedule but we must look at the funding sources to make up the shortfall.”
Gov. Jay Inslee warned lawmakers in April of the predicament they now face.
He reiterated his frustration when he signed the two-year transportation spending plan, saying legislators overpromised how many projects could be delivered by failing to account for declining gas tax revenues, increased costs, and contractor and workforce constraints.
Toll hikes ahead?
As state transportation officials prepared in July to award the contract for Interstate 405, they faced one last hurdle.
They needed lawmakers’ blessing “because the apparent best value bid exceeded the dollar amount appropriated by the legislature for this project,” WSDOT communications consultant Blake Jones said.
And not by a trivial amount.
The project will extend existing dual express toll lanes in both directions of I-405 in Bothell between the State Route 522 and 527 interchanges. Bus rapid transit stations will be located in the center of I-405 at the SR 522 Transit Hub and the Canyon Park and Brickyard park-and- rides.
A cost estimate prepared in fall 2021 was $525 million to be split on an 80/20 basis with Sound Transit, which will take the lead on the bus stations. When the apparent best value price proposal was opened on June 22, the amount was $834 million.
That meant in rough numbers, the state’s share ballooned from $420 million to $667 million.
Transportation officials sought out Liias, Sen. Curtis King, R-Yakima, Rep. Jake Fey, D-Tacoma and Barkis. Liias and Fey chair the transportation committee in each chamber, and King and Barkis are the ranking Republican members.
The four agreed to approve the contract. And also one for the planned upgrade of the toll system along State Route 167, for which the best bid came in 40% above the legislative appropriation.
“Thank you for quickly bringing this issue to our attention so we could have a dialogue about how to find a solution for the Brickyard and toll system projects,” they wrote in a July 21 letter to state Transportation Secretary Roger Millar.
They said they are “committed to reviewing and adjusting as necessary” the plan for financing the balance of planned improvements in the I-405/SR 167 corridor including “options to increase tolling rates, provide additional funding, adjust project timing, or consider other revenue enhancements.”
Lawmakers also acknowledged when bids are opened for several other large projects in the coming months the amounts may exceed legislatively provided funding as well.
Two weeks later, lawmakers wrote the Washington State Transportation Commission, requesting it develop an “accelerated schedule to consider adjustments” to toll rates in light of the cost escalation.
“The tolls on I-405/SR 167 are being invested back into the corridor, so when costs go up, it only makes sense to look towards revenue generated from tolling to be a part of closing the funding gap,” reads the Aug. 4 letter signed by Liias, Fey and King.
Reema Griffith, executive director of the commission, said there needs to be further discussion on what lawmakers have in mind. She presumed they want commissioners to consider increasing the maximum tolls on both I-405 and SR 167.
“We will be prepared to share options and a proposed plan by the end of the year,” she said.
Tolls for the I-405 express lanes range from a minimum 75 cents to a maximum $10.
Fey and King, in separate interviews, insisted they are seeking data and not demanding toll hikes.
“The way I was looking at it is they give us information for a $10 toll, a $12 toll or even $14. What do you think you’ll raise and what would be the effect,” King said.
Fey said he will talk to lawmakers who represent communities along the two highways. Tolling had been seen as the chief source of dollars to pay for projects but it isn’t going to be enough.
“This was a big project for legislators along that corridor. If you have an overage like this something has to happen,” he said. “More money has to come in. We’ve got to figure out which way they want to go.”
Lawmakers face a similar dilemma with their ambitious plan to build new hybrid electric state ferries.
Last year they earmarked $1 billion to build five. That sum could only cover four if there is a 25% rise in costs. Bids won’t be sought until late this year and opened next year. A 40% increase would mean the $1 billion might only stretch far enough to build three.
There’s bipartisan agreement the road ahead paying for projects is going to be bumpy.
Additional sources of revenue are needed if the state intends to keep its current timetable for projects planned around the state. There are quiet rumblings about a revenue package of some sort surfacing in 2024 but that seems unlikely in an election year. Fey said outright he’s definitely not working on a proposal to raise the state’s gas tax.
One potential source is revenue from the Climate Commitment Act, which is on pace to generate $1 billion more than lawmakers expected. Theoretically those are dollars that could pay for cleaner ferries, electric buses and other transportation-linked environmental stewardship, such as replacing fish passage barriers.
Barkis and King want to see sales tax collected from motor vehicle purchases redirected from the operating budget into the transportation budget. Republicans have long argued there’s a clear nexus between those taxes and transportation needs. Democrats have opposed such a move.
Barkis also said transportation spending priorities are wrong, citing $150 million to study a high-speed rail system that will take years and cost billions of dollars to become a reality.
“It is really hard for me when they’re all getting excited about planning for something that may never get built. … while we can’t complete projects,” he said. “A day of reckoning is coming because the priorities are so out of whack.”
— By Jerry Cornfield, Washington State Standard
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