Fund swaps spark county road projects

For counties, trading fed funds for state funds gets more mileage for the buck

Trading 90 cents for a dollar may seem like a bad deal, but for county governments in a growing number of states, it’s a shrewd way to fund road improvements.

For example, Nebraska counties and first-class cities will net $23.2 million for roads projects, after trading $25.8 million in federal funding to the state. While that’s 10 percent less than the original allocation, the money will go further once it is free of federal conditions and procedures that can add time and costs to construction projects. The state department of transportation keeps the 10 percent for its trouble.

A handful of states, primarily in the Midwest, currently have or are introducing federal fund exchange programs, also known as federal fund purchase programs or federal fund swaps.

In Kansas, which pioneered the system in 2010, Geary, Republic and Chase counties used money from their exchange to do chip sealing on their roads, a maintenance-type improvement not eligible for federal aid. Jewell County built a steel girder bridge with features typically not allowed for federal-aid projects, according to the National Association of County Engineers.

Nebraska recently increased its exchange rate to 90 percent from 80 percent, to the delight of Nebraska Association of County Officials Executive Director Larry Dix. That rate brings it in line with what most other participating states currently offer.

“It’s a sign of how good our working relationship with the state is,” Dix said. “When the new administration came in, we questioned whether we could get more of the money and they were willing to reevaluate things. 

“We were still coming out ahead with 80 percent, though.”

That’s because of the mounting requirements and conditions the federal Department of Transportation puts on projects it funds. 

Some conditions on federal money include additional environmental review and greater detail in the design process, additional appraisals for material costs, specific materials required for the jobs and the mandate that an inspector be on site whenever a contractor is working.

A sample cost comparison by the Kansas Department of Transportation showed a 20 percent savings if a $423,000 project was otherwise completed under federal guidelines. 

The engineering and inspection phase of the project was projected to cost nearly three times as much under federal regulations than under local procedures. In addition, federal requirements mean inflation enters the equation, because materials costs increase over time while the myriad permitting processes run their course, sometimes adding up to two years to a project. 

The extra money Nebraska counties save will go a long way toward keeping county roads viable for the dominant economic driver in the Cornhusker State.

“We’re such an agricultural state that getting the product to market from our farms is our biggest priority,” Dix said. “The equipment is getting larger and heavier and the bridges we once built aren’t going to cut it much longer. 

“If we want to be good economic partners we’re going to have to make bridges wider, make the roads thicker to handle this kind of traffic.”

The programs aren’t always winners, though. Wisconsin’s efforts to pass a fund exchanged failed due to opposition from road builders and labor organizations, particularly because federal funding includes caveats about prevailing wages. 

“We’re going to try again next year,” said Daniel Bahr, a government affairs associate at the Wisconsin Counties Association. “It’s a program that can help a lot of our counties finally get some work done on their roads.”

Minnesota manages an even exchange rate, Oregon does $0.94, while Nebraska and South Dakota counties receive $0.90 per $1. Ohio counties trade for $0.80 and Indiana counties for $0.75.

For more information, contact Ron Seitz, bureau chief, KDOT Bureau of Local Projects, 785.296.3861 or Seitz@ksdot.org.

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Delays Likely Ahead

Michigan counties have an agreement with the state department of transportation to develop pilot exchanges in for one urban county and one rural county, though uncertainty with federal allocations slowed down the process.

“If there was any drawback to finally getting a long-term transportation bill passed in Congress, we didn’t know how much to calculate for this year,” said Ed Noyola, deputy director of the County Road Association of Michigan. “That will put us back a bit, but we’re excited to see what this can do. We can’t get by with just a few inches of asphalt anymore.”

If the 2017 pilot goes well, Noyola hopes to add four or five counties to the program.