The demands for highway maintenance and construction spending, and for financial support for public transportation, will continue to increase over the next several biennia. Almost $3 billion in highway construction projects will compete for funding during the next six years, while maintenance costs are rising steadily and are expected to almost double by 1988. All of Virginia's public transit systems operate at a deficit, and federal budget cuts could result in the loss of more than $15 million in annual subsidies. To address these concerns, highway and transportation program management in the 1980s will require systematic evaluation of needs and careful selection of priorities.

Maintenance Needs (pp. 7 to 29)

The General Assembly has recognized that adequate maintenance is essential to preserving Virginia's highway system and ensuring the safety of the travelling public. In 1977, the Assembly directed that the Highway and Transportation Commission allocate "reasonable and necessary" funds for highway maintenance before allocating funds for other programs. The intent of this provision was to ensure that sufficient funds would be available to protect the Commonwealth's investment in its highway system and to provide acceptable levels of safety, comfort, and convenience.

Maintenance costs rose from $48 million in 1970 to $186 million in 1980. DHT projects that by 1985 maintenance costs will require all available funds from current revenue sources, effectively ending the construction program. This represents a substantial shift in the emphasis of the Commonwealth's highway program. New construction and system expansion were foremost in previous years; maintenance of existing roadways will be the dominant concern in the 1980s.

Some of the growth in maintenance costs is the result of growth in the highway system itself. Still, after adjusting for inflation and system expansion, expenditures show a real growth in maintenance spending of 20 percent over the last five biennia. All of this real growth has occurred in the area of maintenance replacement, which increased by 49 percent since 1976. Maintenance replacement includes larger-scale projects such as pavement overlays and major rehabilitation of bridges, drainage structures, and traffic control devices. In contrast, the construction program lost one-third of its purchasing power over the last decade.

This real increase in the maintenance program is now built into the base for future DHT budget requests. Therefore, establishing the need for future maintenance spending depends on the extent to which spending has been consistent with the legislative mandate to budget for reasonable and necessary levels of maintenance. Several weaknesses in DHT maintenance budgeting practice indicate a need for more refined information, however.

Routine Maintenance. Routine maintenance budgets are developed through a Maintenance Management System (MMS) which uses standards to establish funding needs for the various activities. While the system appears fundamentally sound, the standards do not always reflect actual workloads nor do they necessarily guide field crews in carrying out routine maintenance.

For example, MMS budgets do not always reflect the actual work to be performed. A recent review of several workload indicators by the Virginia Highway and Transportation Research Council found that the workload estimates used in MMS varied from actual workloads by as much as 800 percent. While the research council did not attempt to project these findings to the entire system, an effort has been undertaken to measure more accurately workload for pavement surfaces, drainage structures, bridges, and other major components of the highway system.

Moreover, field staff often vary their workload from what was used to develop budgets based on standards. For example, 32 residencies spent $4.1 million, or 24 percent on the average, less on drainage than was budgeted by MMS. In contrast, 34 residencies spent approximately $5.5 million, or 27 percent on the average, over budgeted amounts for bituminous surface maintenance.

Although some variation necessitated by unanticipated events may be warranted, the degree of variation between maintenance expenditures and budgets raises questions about the actual value of the MMS as a means of assessing needs and budgeting for maintenance. DHT should carefully reevaluate its policy concerning residency compliance with budgets based on workload standards. Either closer adherence to the standards should be required or the value of maintaining and updating the standards should be reviewed.

Maintenance Replacement. Maintenance replacement activities are budgeted on the basis of previous years' activity coupled with a review of field office requests by district and central office staff. Budgeting for maintenance replacement follows a traditional incremental form based primarily on staff judgements and the availability of funds. While the pace of maintenance replacement spending has increased dramatically over the last several years, more systematic information on replacement needs should be made available. Adoption of a pavement management system and improvement of existing bridge rating procedures will help DHT to better relate the level of maintenance replacement spending to the legislative mandate for reasonable and necessary maintenance funding.

Maintenance Productivity. Efficient use of resources by DHT is also important in determining maintenance funding needs. Analysis of DHT expenditures and labor and equipment use shows that there is substantial variation in productivity between residencies, and that at least some of the variation can be attributed to the different practices used in performing maintenance. Statistical analysis of these differences indicate that DHT could achieve a savings of approximately eight percent in its ordinary maintenance program by improving productivity. This would amount to a biennial savings of $9.7 million. DHT should review its procedures for identifying and disseminating improved work practices to more quickly and effectively upgrade maintenance productivity.

Legislative Control. A review of DHT spending also found that the 1978-80 biennial maintenance budget was overspent by $59 million above legislative appropriations. Appropriations Act provisions clearly establish a spending limit for highway maintenance but this provision appears to have been disregarded. DHT contends that the overspending was for purposes more similar to construction than maintenance. However, similar activities have been coded as maintenance by DHT since at least FY 1971. A revision in control procedures within the Department of Accounts is necessary to ensure that future spending is consistent with the Appropriations Act.

Overall, the review found that the record is unclear on the degree to which past patterns of maintenance spending have been consistent with the legislative mandate to budget for reasonable and necessary levels of activity. What is known is that spending has increased in real terms and, in one case, beyond what was intended by the legislature. DHT program managers believe that the current spending level is required to avoid premature deterioration of highway and bridge facilities as well as to promote the safety and comfort of highway users. However, better information and more systematic use of existing standards are necessary for DHT to be fully accountable for spending.

DHT should develop an annual maintenance program which assigns priorities for all maintenance activities. The program should identify alternative spending levels and the implications of funding each level. For example, protection of the existing highway network and provision of fundamental safety and comfort levels could be identified as a first priority. Additional maintenance activities which would provide higher levels of comfort, convenience, and aesthetics should be identified as a separate program level.

The Highway and Transportation Commission should review and approve the maintenance program and provide opportunity for review and consultation with appropriate legislative committees. A draft version of the program should be developed by January 1983 and a status report provided to the General Assembly. The approved program should then be available for incorporation into the development of the 1984-86 biennium budget.

Construction Needs (pp. 31 to 57)

Construction of new highways and major rehabilitation of existing roads has been the primary function of DHT in the past. In the last 15 years, $4.5 billion was spent for highway construction. Nevertheless, the most recent assessment prepared by DHT in 1980 showed additional construction needs totaling $6.7 billion, a figure acknowledged in the DHT report to be unfundable under any reasonable assumptions. Therefore, a means of establishing priorities among potential projects is essential if needs studies are to be of use to the General Assembly in establishing budgets and appropriate tax policies.

An analysis of projects contained in the 1980 needs report found that one reasonable approach to establishing priorities among projects reduced construction funding needs over the next three biennia to $2.35 billion. This amount would ensure receipt of the expected $1.5 billion in available federal aid, provide for continued funding of Virginia's interstate program, and address construction needs most directly related to current concerns for traffic volume, congestion, safety, and structural deterioration of existing roads. In urban areas where population growth and economic development are key factors, 82 projects now underway or awaiting funding would be moved to construction. In perspective, however, even this level of spending would amount only to 59 percent of the purchasing power of the 1978-80 construction program. This fact confirms that the combined effects of inflation, slow revenue growth, and increased maintenance spending will result in less construction in the future than was possible in the past.

Other options for construction funding are also possible and are detailed in this report. Subsequent to the draft of this analysis, DHT released a draft critical improvements program which provides yet another optional spending level for consideration by the General Assembly. In order for the legislature to conduct an orderly review of the implications of various construction spending proposals, DHT should prepare and submit as part of its budget requests to the General Assembly a four- to six-year construction program which is based on an analytic framework that clearly distinguishes when funds will be required for construction. The program should include provisions for annually updating and adjusting the program to report on progress in fulfilling program objectives and to accommodate General Assembly action or other changes in existing conditions.

In addition, the General Assembly may wish to amend statute to require that the Highway and Transportation Commission allocate sufficient funds to match available federal aid for highway construction. A review of current statute and legislative history suggest that this is consistent with the intent of the General Assembly. This action would prevent the lapsing of Virginia's apportionment of federal aid because of a lack of matching funds and would provide for a minimum construction budget of about $300 million annually. Implications of the current legislative priority on maintenance and the statutory allocation formula should also be considered.

Public Transportation Needs (pp. 59 to74)

Public transportation in Virginia includes 15 public transit systems as well as a variety of ride-sharing programs sponsored by businesses and public agencies. The most critical issue today for public transportation in Virginia is meeting the cost of providing transit services. All transit systems operate at a loss which ranges from ten cents per passenger trip in one system to well over one dollar per trip in several others. During FY 1980, operating costs for the 15 systems exceeded $100 million, while revenues amounted to less than half that amount, resulting in a deficit of approximately $51 million.

Funds to meet transit operating deficits are provided largely by the localities and the federal government. However, current proposals before Congress and supported by the administration call for elimination of federal operating subsidies for local transit. Virginia could experience a loss of more than $15 million annually in federal aid. In response, transit systems would have to raise fares substantially as well as reduce existing service levels, or rely on local governments for additional financial support.

Current State policy prohibits the use of State funds for transit operating subsidies. In order to address the changing environment created by proposed shifts in federal policy, the General Assembly may wish to review legislative options through creation of a special joint subcommittee.

In order to assist the General Assembly in its review, the public transportation division of DHT must seek ways to better fulfill the role mandated in statute. The division is authorized to prepare needs assessments and funding proposals, as well as conduct investigations of transit system operating efficiency and economy. To date the division has not fulfilled this oversight role or provided the type and quantity of information necessary for full consideration of State policy in this area.