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Old roads initiative limiting new repairs

COLUMBIA -- South Carolina's shortcut to pay for road projects is limiting the state's ability to fix or replace shoddy bridges -- a pressing concern in the wake of a deadly Minnesota bridge collapse.

In 1998, the S.C. Transportation Department commission, faced with mounting road needs and slow-growing gas tax revenues, decided to borrow $690 million, the centerpiece of a $5.3 billion road-building program. The initiative was called "27 in 7" because its intent was to build 27 years' worth of projects in seven years.

Transportation officials and legislators said the program has met most of its goals -- building many projects at a lower cost than would have been paid if the projects were built later.

But the program also means the Transportation Department will have to pay up to $60 million a year over the next decade to pay off its 27 in 7 debt. That obligation substantially reduces the amount of money available to pay for an estimated $2.9 billion in needed bridge maintenance over the next 20 years.

"Without an increase to (the DOT) budget, we have mortgaged the future," said Sen. Larry Grooms, R-Berkeley, chairman of the Senate Transportation Committee. "There are a number of bridges that need to be replaced that we're putting off until tomorrow."

The state has budgeted $105 million for bridge maintenance this year and $125 million next year. That's just enough, Transportation administrators say, to keep pace with scheduled maintenance.

Meanwhile, S.C. has 1,300 bridges that do not meet federal standards, and the cost of the 27 in 7 borrowing will make it more difficult to pay for those repairs.

The Transportation Department's limited options mean road funding -- and how much should be spent on maintenance -- will be a top issue for lawmakers in January, Grooms said.

The state has not raised its gas tax since 1987, and Transportation officials say revenue growth has not kept up with needs.

Last year, the gas tax brought in $505 million, according to Board of Economic Advisors data, up 10.7 percent since 2002. However, inflation over the same period was 13 percent.

27 In 7

How did we get here?

Facing a population boom and flat or declining gas tax revenues in the late 1990s, state Transportation officials tried a new tactic to build roads.

With interest rates low, the idea was to borrow money up front and pay it off with future gas tax revenues, hoping those revenues would increase over time.

South Carolina was among the first in the nation to finance its highways this way. But, with construction costs increasing at up to three times the rate of inflation, the idea has caught on around the country, said David Ellis, a researcher at the Texas Transportation Institute, an affiliate of Texas A&M University.

"Ultimately, it's generally a winning proposition," Ellis said, adding the money saved on inflation usually is more than the cost of borrowing the money. "You're always fighting the battle with the gas tax that the gas tax loses value over time. ... Every year, your ability to meet those demands is diminished."

Hugh Atkins, a state Transportation commissioner, said 27 in 7 was a success. It finished projects -- including the Conway bypass and Carolina Bays Parkway in Horry County, and parts of Charleston's Ravenel Bridge -- on time and at budget.

"It was a good decision," Atkins said, adding the agency now needs to focus more on maintenance. "I don't think we can keep doing it (maintenance) and still fund all these new projects."

Transportation commissioner Tee Hooper agreed the program had some advantages. But, he added, the state also included projects that "should not have been done." Hooper declined to name the projects.

"I think we did leverage our maintenance funds to do it," Hooper said, "and that's hurt a bit."

Fewer road projects

In part because of the 27 in 7 program, the state will be starting fewer road projects this year and beyond.

According to the agency, in the seven years prior to the start of 27 in 7 in 1999, the state had a construction program of $1.15 billion. During the next seven years, that total jumped to $5.3 billion.

Over the next seven years, the agency expects construction to fall back to $1.15 billion.

Total construction projects decreased to $268.4 million in fiscal year 2006-2007 from $429 million in fiscal 2005-2006.

Highway contractors, such as C.R. Jackson president Richard Jackson, say the state needs to add more money to the Transportation Department's budget.

"The problem at the highway department is insufficient funds," Jackson said. "We can't keep finding reasons we can't do this."

Grooms agrees the only solution is more money.

Some, such as House leaders, favor adding money from the state treasury. Others have advocated raising the state's 16.8 cents-a-gallon gas tax. Toll roads could be an option as well.

Funding the agency, Grooms said, will take some motivation. But the dangers of aging bridges, poor-quality highways and narrow rural roads with no shoulders should force lawmakers to make a hard decision about how to fund the agency.

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