Federal highway funding: Use it or lose it

PART ONE OF TWO

After years of delays on major Hawaii transportation projects, Federal Highway Administration officials are warning the state they may yank funding for new highway projects unless the state streamlines its plodding, bureaucratic system and moves roadwork into construction more quickly.

For years Hawaii highways officials have wrestled with a huge backlog of federally funded road projects worth hundreds of millions of dollars that are stalled by delayed payments, unnecessary steps and a lack of staff expertise in key areas such as federal environmental requirements.

But federal officials say the state is still moving too slowly, according to records obtained from the Federal Highway Administration by the Honolulu Star-Advertiser under the Freedom of Information Act.

At the current rate of progress, federal transportation officials warned last year it would take Hawaii more than a decade to reach its goal of reducing the total value of pending projects to $450 million, which would be about half the original size of the backlog.

Gov. David Ige said the state already has lost out on federal highway funding because of the backlog. The governor has personally assured U.S. Transportation Secretary Anthony Foxx that Hawaii would do a better job of moving transportation projects forward.

Ige’s assurances follow a written warning last year from the Federal Highway Administration that as of last July 1, the state is being given just 180 days to move into actual construction from the time the federal government commits funds for each new Hawaii highway project.

If the state fails to meet that timeline, "federal funds will be subject to deobligation," wrote Mayela Sosa, Hawaii division administrator for the federal agency.

According to a recent federal program review of the Hawaii system, the state took an average of 367 days in 2012 to move projects into construction from the time federal funding had been authorized.

The state was able to reduce that time lag to an average of 270 days the following year, but nine other states are able to complete a similar process in an average of 80 to 100 days, according to the 2015 federal review.

U.S. Sen. Brian Schatz said federal officials are taking a collaborative approach to solving the problem, "but we’re not where we need to be and they know it, and the state knows it, and now it’s about executing on a plan to getting this fund balance down over the next couple of years."

Schatz joined U.S. Rep. Mark Takai and staff from other members of the Hawaii congressional delegation in Honolulu last month to discuss the problem with top state transportation officials. He concluded that "we have a long way to go to reduce the backlog."

"This is about federal funds to which we are entitled, and making sure that we spend those dollars on transportation infrastructure," Schatz said. "Every dollar unspent really hurts commuters and is a dollar that we could have used to boost our economy, so we’ve got to have a collective sense of urgency about this problem."

State Department of Transportation Highways Division Deputy Director Edwin Sniffen said the state is tackling the problem by increasing staffing in key areas to move projects more quickly, and focusing more resources on maintaining existing highways rather than building new roads.

The permitting and environmental review processes tend to be much simpler for maintenance and safety improvements that stay within existing highway rights-of-way than for projects that break new ground, so the new emphasis is on repaving and other maintenance work that can move forward quickly, he said.

As part of that shift, the state intends to cancel planning and design work on some large-scale, long-term projects that cannot realistically be completed anytime soon, he said. Two examples of projects that are being delayed indefinitely are the Kapaa Relief Route on Kauai and the Kawaihae Bypass on Hawaii island.

"Looking at the program itself, the funding that we have, the resources that we have, we’ll not get to it," Sniffen said of the deferred road projects. "So we’re making a decision to stop moving forward on those projects at this time."

Hawaii receives about $160 million in new federal highway funding every year, and Sniffen said he is confident the state will be able to shepherd new projects into construction within six months to meet federal requirements and preserve that funding.

Dubbed the "Pipeline" by state officials, the backlog of federally funded projects peaked in 2010 when $940 million in unspent federal funds for Hawaii roadwork was sitting on the books, according to Federal Highway Administration reports. That was during the recession when the state economy needed the construction jobs that could be created by the stalled highway projects.

In 2011, Hawaii transportation officials told the federal government they would try to reduce the backlog to $450 million by the end of 2014. That didn’t happen, but Sniffen said the state is making progress and has whittled the backlog down to $661 million as of June.

After warning that the backlog had reached "unacceptable levels," the U.S. Department of Transportation dispatched teams of experts to Hawaii last year to review the state systems used to evaluate, approve, process and fund federal projects. The teams wrote program reviews that were delivered to the state in January along with the message that "decisive action must be taken to reduce the Pipeline."

The federal experts found many problems, including:

» The Hawaii DOT has the smallest environmental staff of any highway department in the nation, which causes delays in efforts to prevent or offset any potential environmental impacts from highway projects.

Those environmental issues must be resolved before projects can advance, but federal officials found the Highways Division has a "critical" lack of expertise on issues related to endangered species and the federal laws that protect them, according to the federal review. Sniffen said the state has hired consultants as a stop-gap measure to beef up its environmental staffing because the department does not have the necessary in-house expertise.

The department has also begun planning for a new environmental branch that will handle those tasks, but "that’s going to take some time going forward," he said. "We don’t have the scientists that are necessary to run the program ourselves."

» Satisfying federal cultural and historic preservation requirements caused "the longest delay in project development," according to federal officials. However, Hawaii officials haven’t been able to find qualified people to work as staff archaeologist or architecture historian for the DOT, two positions that would help provide the necessary expertise.

Federal officials urged the department to fill those positions quickly, and Sniffen said the state has hired an archaeologist. The department is still trying to fill the historic architect position, he said.

» It takes the state DOT up to a year to obtain a particular permit under the federal Clean Water Act that is issued by the state Department of Health, according to the federal review. That permit is required before highway construction can begin, which means those delays can slow the progress of the entire project. To cope with that issue, Sniffen said the state DOT has funded two positions within the Health Department specifically to speed that permitting process.

» Another problem was the high turnover among staff in the State Historic Preservation Division within the Department of Land and Natural Resources, which oversees cultural and historic preservation efforts. That rapid turnover makes decisions about historic preservation on highway projects "more vulnerable to challenges and delays," the federal review said.

» State transportation officials leave projects vulnerable to procurement challenges by unhappy contractors that may stop the project entirely, federal officials found. In some cases when there are disputes over a bid result, the state does not quickly make public the results of sealed bid openings. This gives vendors extra time to file complaints that can prevent contracts from being awarded, according to the review. State officials replied that they are required by Hawaii law to delay posting the bid results in many cases, but federal reviewers urged the state to change the law if necessary.

» Another contributor to project delays is an extra approval by the governor that is required by the department before bids are advertised, a step federal officials said is apparently not required by law. That step is "adding significant time to the overall project delivery process," and many states have no such requirement, the federal review said.

» Federal officials also urged the department to automate more of its fiscal functions in connection with federal funding, tasks that are now handled manually. Among other things, the federal reviewers urged the state to bill the Federal Highway Administration more frequently to improve cash flows for projects.

Sniffen said automation of the state highways fiscal system has proven difficult. He said the backlog built up over the years because of a culture in the state DOT that stressed quickly securing federal funds. However, the complex processes required to execute those projects and spend the money sometimes dragged on for years.

The thinking was that "once you get that obligation or commitment, that funding is locked up and safe now," Sniffen said. "It’s not wrong; it’s just different. That was just what it was at the time."

Federal officials became far less accepting of that approach in recent years as Congress struggled to fund transportation projects, he said. The backlog means the state has not been eligible for extra federal funding that is redistributed each year from other states that have not spent allocations, Sniffen said.

Ige said the state is making good progress in reducing the backlog and said he intends to reform the processes for managing highway projects.

"I have expressed to our people that it is important that we fix the system, that we have to identify where the bottlenecks are and what can we restructure to be more efficient and effective," he said.