GAO report shows $15.8 billion spent on paving, bridge projects in 2009

The U.S. Government Accountability Office’s (GAO) latest report on stimulus funds, released July 8, shows more than $15.8 billion has already been given to states for highway projects. The $15.8 billion is 59.5 percent of the $26.6 billion allocated to the states for pavement and bridge projects.

For the report, GAO visited 16 states and the District of Columbia to observe the use of stimulus funds, including how and where funds are being used.

The states visited by the GAO received around $9 billion so far this year for highway projects. California received the most funding with $1.5 billion, or 60.6 percent of its total allotment, followed by Texas, which received $1.1 billion, or 51.7 percent of its total allotment.

Paving and bridge projects received most of the stimulus highway funds so far this year. Paving received around 72 percent and bridge projects received around 12 percent.

Of the paving projects, around six percent was allocated for new construction, 48.9 percent for improvements and 17 percent for widening. In the bridge projects, around two percent was allocated for new construction, four percent for replacement and five percent for improvement.

Michigan is among the states using most of the highway funds for paving and resurfacing projects. The state began a $22 million project on Interstate 196 in order to create jobs quickly. Michigan’s construction employment fell 17 percent from last year and has the country’s highest overall unemployment rate, 14.1 percent.

According to the report, the District of Columbia’s largest stimulus project is a bridge rehabilitation. New York and Pennsylvania are using more than one quarter of their allocated highway funds for bridge projects, GAO says.

One of the problems facing states with stimulus projects is reimbursement by the Federal Highway Administration (FHWA). States can take two or more months to accept bids and have work begin, but FHWA may take up to two years to give the states reimbursement for the projects. The state of North Carolina has been reimbursed $4 million out of the $200 million in projects that are already underway, 27 of which total around $70 million and are expected to be completed by December 1 this year. So far, the FHWA has reimbursed $233 million nationwide.

The GAO report showed that many states are reporting bids at or below estimates because many contractors are looking for work. The bids are anywhere from five percent to 30 percent below estimates, because of competition and declining costs of materials. The state of California told GAO that anywhere from eight to ten contractors were competing for bids and contracts were going for around 30 percent below estimates. In Arizona, where construction employment dropped 28 percent since May 2008, says that contractors are willing to bid lower in order to get people back to work.

Priority over which projects and which areas of the state get the most money varies from state to state. The ARRA requests that states give priority to projects that can be completed within three years to areas deemed economically distressed areas (EDA), which is determined by comparing state or federal unemployment data to local unemployment and income data.

Some states, such as Arizona and Illinois, developed their own ways of determining which areas were EDAs. With the ARRA’s way of determining an EDA, Arizona’s hardest hit cities were left out. Arizona created a new way of determining EDAs using home foreclosure rates and disadvantaged businesses.

States considered mostly geographic distribution, job creation and EDAs when deciding how to prioritize stimulus funds. Some focused mostly on EDAs, while others selected projects based on readiness.

The ARRA offers more than $135 billion in construction-related funding, $28 billion of which was initially set aside for highway projects.