One of the most innovative and successful programs offered through the state department of transportation in partnership with counties and cities is the now 40-year-old Surface Transportation Block Grant (STBG) Fund Exchange Program, which efficiently leverages infrastructure funding in order to preserve and maintain Oregon’s transportation infrastructure system in the most cost-effective manner for Oregon taxpayers.
This program allows local agencies to exchange federal dollars for state dollars. Federal funds come with burdensome federal requirements, which local governments often cannot afford, slowing, or ultimately stopping critical infrastructure projects.
“Delays often equate to increased cost as resources, labor, and general compliance measure costs have increased significantly,” said Association of Oregon Counties County Road Program Director, Brian Worley.
Now, under the heavy impacts of inflation, depleting revenue sources, and high need to repair, replace, and add new infrastructure, the fund exchange program, a critical resource for counties, is under threat. Like the other 10 states with fund exchange programs, and Oregon’s county governments, the Oregon Department of Transportation (ODOT) has felt the diminishing budgetary impacts of the pandemic and widespread economic and compliance concerns for all transportation infrastructure stakeholders.
ODOT is no stranger to constricting budgets with spending limitations in its Operations and Maintenance (OM) budget and long-term deficits in the State Highway Fund, ODOT has proposed reducing and eliminating the fund exchange program. Under current statute, the OM budget is the budget in which local governments exchange their federal funds. Under the exchange, ODOT receives 10 cents for every dollar to recoup administrative costs. This share has increased in recent years due to ongoing budgetary shortfalls.
To remedy this issue, the Association of Oregon Counties (AOC) proposed HB 2101 as one of its priority bills in the 2023 Legislative Session. HB 2101 allows ODOT the flexibility to exchange State Highway Fund dollars with counties and cities – opening up a secondary option to fund the program and alleviate the department’s concerns regarding their OM budget to cost-effectively manage federal funding. AOC and 16 of its member counties submitted testimony during the January 31 public hearing in the Joint Committee on Transportation of the Oregon State Legislature.
In their joint testimony, AOC President and Klamath County Commissioner Derrick DeGroot and Oregon Association of County Engineers and Surveyors President, Tom Fellows said, “Everyone wins with this arrangement; the state alleviates the burden of administering local federal-aid projects and counties alleviate the burden of federal requirements. Due to a favorable exchange rate, the STBG Fund Exchange Program is also a revenue generator for ODOT when functioning with full state resources.”
On average, the funding from this program is the third largest source for county governments – and for some counties, equates to over 10 percent of their annual operating budget. This means any hit to this program could collapse or delay crucial infrastructure projects across the state, a discussion that has been ongoing between counties and the department since 2020.
During the public hearing, members of the committee, and the department took well to the concept and indicated the bill is likely to advance during the session.
A follow up informational meeting was held, Tuesday, February 14, before the Joint Committee on Transportation to discuss the partnership between the state, counties, and cities. AOC presented before the committee.
Staff at AOC, as well as member counties are continuing to work with stakeholders to pass this long-term, sustainable funding solution for the fund exchange program.
Contributed by: Megan Chuinard | Public Affairs Associate