Senate Joint Resolution 85 of the 1974 Virginia General Assembly requested the Department of Highways and Transportation to review the needs of the Secondary Road system for five and ten-year periods and to report to the Legislature concerning these needs by December 1, 1974. In order to provide for a ten-year description, this report is directed toward the year 1985 as a target year.

This report has been prepared to describe to the General Assembly the current status of the needs and the prospects of meeting these needs for the Secondary Road system. Discussing the Secondary Road system also requires summarizing the status of other systems and particularly the economic situation governing the Department's expenditures. Accordingly, this report will also generally describe the Department's projected ability to finance the Interstate system, the Arterial network, the Primary system, the Urban system and transit facilities.

The Department of Highways and Transportation is in a comparable position to the retired person living on a fixed income. This Department receives revenue from road user taxes, licenses, fees, etc. which can generally be estimated, and in addition to federal funding, accumulates relatively similar revenue with a slight increase on a year-by-year basis. This year, however, the effect of the inflation has produced drastically increased construction and maintenance costs approximating 30% in one year along with higher administrative costs resulting in less funds available for actual construction. Concurrently, numerous additional requirements have been placed upon this Department which must be fulfilled prior to initiation of any project. This involves coordination with air and water control boards, the preparation of environmental quality statements, numerous public hearings and delays in federal project approval. These may all be worthwhile causes; however, the resulting decreasing effect upon the amount of funds available for construction because of these additional overhead charges is significant. In addition to the inflationary trend, the energy crisis has created a situation where less fuel is being sold and as a result, travel is not increasing as rapidly as in previous years. This produces a direct reduction in income for this Department. As a result, the impact upon this Department of the economic and energy crisis in the fall of 1973 and throughout 1974 has resulted in greater charges for individual projects upon the available funds with no appreciable increase in revenues to offset this greater demand.

As the matter of highway needs and particularly secondary road needs is considered on a statewide basis, it is important that the economics of highway facility financing be considered. A needs gap will occur which is the difference between what is required to meet specific standards within a given period of time and that which can actually be accomplished within the same period of time. The ability to efficiently distribute and allocate funds to meet these given needs is the only manner in which these needs can be met. The amount of construction funds available for all systems is being reduced and .at the same time the construction dollar is worth approximately 50% of what it was in 1967. Resolving highway system needs in a given period of time is going to be most difficult.