The economy presents major roadblocks for any road bonds legislation in the 2009 Legislature, which convenes Jan. 7. In a pre-session survey of Nebraska lawmakers, only nine senators supported going into debt to build roads. Eight opposed it. More than half in the survey 22 were undecided. (Not all lawmakers responded to the survey.)
Several said that although they were intrigued by the concept, economic uncertainty made it difficult to commit. The Greater Omaha Chamber of Commerce is joining chambers from across the state in pushing a proposal to authorize the issuing of bonds for major roads projects. They say lawmakers shouldn’t let short-term considerations keep them from considering longer-term fixes to the state’s problems paying for roads.
Senator Mike Friend of Omaha plans to introduce a road bonds bill. Most states issue bonds for road construction; 41 states currently have outstanding bonds. But both Nebraska has no current road bonds and has been reluctant to issue them. Nebraska has issued a mere $20 million worth of road bonds in its history. Those bonds in 1969 helped complete Interstate 80 across Nebraska. With a growing state and local road construction backlog and falling gas tax revenues, some advocates say it’s time for Nebraska to consider issuing bonds to fast-track highway improvements.
The Omaha Chamber this past year pitched a road bonds proposal to local government officials and business leaders statewide. It drew particular interest in communities along the state’s proposed expressway system major projects on which construction has largely ground to a halt. For example, the expressway between Omaha and Norfolk was supposed to have been completed in 2003, but no work is scheduled on the project in the next 15 years.
As drafted, the chamber proposal would authorize the state to issue up to $250 million in road bonds to fund major projects. A five-member board would decide which projects would be funded based on need and their economic development potential. The plan also would create a fund from which local governments could borrow for road projects. A state revenue source would have to be designated to repay the bonds, although the proposal currently does not specify what that would be. Other states typically allocate a portion of the gas tax or other road-related revenue for that purpose. Although there is concern about going into debt to pay for roads, chamber officials say high inflation in road construction actually makes issuing bond cost-effective.
The cost of road construction has been increasing at double-digit rates over the past five years, at one point hitting an annual rate of 27%. At those levels, advocates of bonds say, it makes economic sense to borrow at 5% interest to build the projects now. Governor Dave Heineman has voiced opposition to road bonds. And the survey of state lawmakers shows there are other potential potholes.
Senator Tony Fulton of Lincoln said the potential of beating inflation by issuing road bonds makes him open to the proposal. However, he said, indiscriminate borrowing is one of the reasons the national economy is in such sad shape.