Financing Nebraska road construction with bonds gets new push in Legislature -
Published Tuesday, February 11, 2014 at 1:00 am / Updated at 1:06 am
Financing Nebraska road construction with bonds gets new push in Legislature

LINCOLN — Three years ago, state lawmakers passed a groundbreaking law that altered the way Nebraska pays for state highway construction.

Now, those who build roads and those who support increased construction work want to take a bulldozer to another state road-funding tradition.

A bill scheduled for a public hearing Wednesday would allow the state to use bond financing for up to $400 million worth of highway projects.

Bond financing of road construction is something done in 48 states — and is commonly used by local governments in Nebraska to build local schools or city streets. But the state has turned to bond funding only once — a $20 million bond issue in 1969 to complete Interstate 80 across the state.

In Nebraska, the custom has been “pay-as-you-go” in building roads, not going into debt to do it.

Some key state senators say they like the state's current system and are worried about the risks of taking on long-term debt to build highways. Gov. Dave Heineman, through a spokeswoman, declined to comment but has made it clear that he opposes the idea.

But supporters of Legislative Bill 1092 said that with interest rates low and highway contractors hungry for work, the time is right to use bonds to accelerate construction of long-delayed projects.

“Why would we not want to take advantage of low interest rates?” asked State Sen. Annette Dubas of Fullerton, the bill's sponsor.

Dubas said the state now has a reliable source of revenue to pay off highway bonds because of the new funding from the 2011 law, LB 84. That gives senators more of a “comfort zone,” she said, to support bonding because it virtually ensures the money to pay off the loan.

“This is a fiscally responsible way to move forward,” said Dubas, who heads the legislative committee that oversees transportation bills.

Even some old opponents of LB 84, also known as the Build Nebraska Act, say bonding is the best way to get more projects completed and get them done sooner.

“I've kind of come around that LB 84 is here to stay,” said Omaha Sen. Jeremy Nordquist. “Knowing that, it's time to put the dollars to their best use.”

The bonding bill has the support of the highway contractors but is causing a divide at the Nebraska Department of Roads. The department is officially opposed to the bill, even though the State Highway Commission, an advisory panel appointed by the governor, voted 6-1 to support LB 1092.

When passed in 2011, LB 84 turned the state's philosophy of funding highway construction on its head.

Before then, Nebraska relied on fees paid by highway users such as gasoline taxes and motor vehicle licensing charges to finance road construction.

But LB 84 changed that by earmarking one-fourth of a cent of state sales taxes — a tax paid by everyone — to new highway construction projects.

The bill drew an army of supporters, who argued that traditional forms of funding roads were falling behind in maintaining existing highways, leaving nothing for new expressways or road widening projects. That left on hold projects like widening a dangerous stretch of Nebraska Highway 133 from Omaha to Blair and completing the state's rural expressway system.

But even with about $60 million annually in additional funds for state highways from LB 84, Dubas said it isn't quite enough.

While work has begun on Build Nebraska Act projects like Highway 133 and widening I-680 near Pacific Street in Omaha, Dubas and others say bond financing would allow the state to do more and to do it now instead of years down the road.

Under her bill, the state could use about half of its annual LB 84 funds to pay off highway bonds. That would allow up to $30 million for annual bond payments, which, with current interest rates, would finance up to a $400 million bond issue.

This year, the Build Nebraska Act is targeting six projects, three in Omaha, one each in Kearney and Wahoo, and the expressway to Blair. But the cost of those projects adds up to $143 million, which would consume all of the state's portion of the act for almost 2˝ years.

But if the state had another $400 million to spend immediately by issuing bonds, work could begin on more projects, such as widening the Schuyler-Fremont stretch of U.S. Highway 30 (a $140 million job), completing the Heartland Expressway between Scottsbluff and Alliance ($56 million) and beginning the widening of I-80 west of Lincoln to six lanes ($35.6 million).

“We should take advantage of low interest rates before they go up,” said Omaha Sen. Heath Mello, one of nine co-sponsors of the bonding bill.

But two state senators said they're still skeptical.

“Someone has to prove to me that committing the state to 20 years of bond payments makes sense,” said Sen. Galen Hadley of Kearney, who heads the Legislature's powerful Revenue Committee.

Sen. Greg Adams of York, the speaker of the Legislature and a former Revenue Committee member, said he, too, wonders about committing future lawmakers to paying off debts far into the future.

Adams said he was also concerned that bonding would “politicize” the process of selecting projects. He said road projects are now picked based on traffic counts and the condition of pavement, but bonding might encourage projects to be added for political rather than engineering reasons.

Rod Vandeberg of Falls City, a state highway commissioner who was absent for that group's vote, said he opposes the bonding bill. He said he was concerned that the Roads Department could become overwhelmed with too many construction projects.

Mary Johnson, a Lincoln lobbyist who headed the coalition of contractors, chambers of commerce and local government officials that got the Build Nebraska Act passed, said bonding would allow Nebraska to save money on construction costs by avoiding inflation on materials. And more communities would share in the safety and economic benefits of better roads, Johnson said.

“It may be unusual here, but it certainly isn't unusual everywhere else,” she said.

Wyoming is the only other state that doesn't use bonding, Johnson said.

The Build Nebraska Act, when it was first introduced, included $25 million a year for bonding, but that was dropped from the bill.

Now, supporters of bonding say, the time has come to restore it.

“It's as much a psychological thing that we need to overcome,” Dubas said.

Contact the writer: Paul Hammel    |   402-473-9584    |  

Paul covers state government and affiliated issues and helps coordinate the same.

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