State DOTs tap pandemic funds for debt service and P3 projects

Eight state departments of transportation have tapped pandemic funds to cover debt service payments while most of the funds were used to support existing capital projects.

Florida used some of its aid for availability payments on a high-profile public-private partnership highway project.

“We’ve seen the pandemic funds being used in a variety of ways, which was the intent of the language from Congress,” said Alison Black, chief economist for the American Road & Transportation Builders Association.

ARTBA published the analysis of how state DOTs are using the funds in the most recent issue of Transportation Builder magazine.

The Coronavirus Response and Relief Supplemental Appropriations Act, passed in December 2020 as part of the omnibus 2021 package, provided $900 million in additional COVID relief.

That included $10 billion for state DOTs – the first and only pandemic relief that went directly to state DOTs, Black said. The bulk of that, $9.8 billion, was distributed through the Surface Transportation Block Grant Program, with the remaining $200 million going to territories, tribes, and Puerto Rico’s transportation programs.

It’s also the only relief aid that can be used for debt service. States and local governments that received roughly $500 billion of stimulus aid in the American Rescue Plan Act and CARES Act are not allowed to use it for debt payments.

The Federal Highway Administration’s guidance for the supplemental state DOT aid notes that debt service and availability payments are among eligible uses. Capital projects and personnel costs like employee salaries are other allowable uses. The law allows for “extraordinary flexibility,” the American Association of State Highway and Transportation Officials noted shortly after it was enacted.

Black noted that the funds are also not subject to the same restrictions as federal highway funds formula dollars.

“We were interested in the question of how the states are using the money, and you are seeing states being flexible in using the funds.”

States have until September 2024 to fully obligate the money.

The states of Missouri, Washington, Kansas, New Mexico, West Virginia, Hawaii, Delaware and South Carolina used the money for debt service payments, according to the ARTBA analysis.

Missouri used the largest amount, $216 million, for its fiscal 2021 debt service payments. Washington tapped $143 million for its fiscal 2020 debt payments.

The FHWA discouraged the use of CRRSAA funds for debt payments on bonds issued for non-highway surface transportation projects, according to the guidance.

Florida directed $160 million of the pandemic funds toward availability payments on its I-595 P3 project, another use specifically named in the guidance.

“To the extent a state is in default on, or needs funds for availability payments related to highway surface transportation, such availability payments are eligible for reimbursement,” the FHWA said.

State DOTs spent most of the money, $3.7 billion of the $5.4 billion, on capital projects, with the funds supporting more than 600 projects across the country, ARTBA found.

Texas used the largest amount, $604 million, for its I-35E reconstruction project. New York used $501 million for the design-build contract on the Van Wyck Expressway. Pennsylvania used $343 million for revenue losses. Ohio, Oregon, Alaska, Nebraska and Minnesota also used the money to cover lost revenue.

A total of 14 states have obligated at least 90% of their CRRSA funds and seven have obligated 10% or less, including California, Michigan, Washington DC and New Jersey, ARTBA found.