Federal funding delays to hit Iowa Aug. 1

As Iowa heads into the heart of summer construction season, the state faces the likelihood of millions of dollars in reduced federal reimbursements for transportation projects beginning in August.

Iowa could come up short $20 million to $25 million by mid-August, and more as time goes on, according to an estimate from an official with the Iowa Department of Transportation.

'We are expecting we will have more requests then funding available,” said Stuart Anderson, a director with Iowa DOT.

State transportation officials were notified by Transportation Secretary Anthony Foxx on Tuesday of a new cash management plan intended to slow the dwindling Highway Trust Fund. As part of the plan, states will receive reduced and delayed payments for federal road and transit projects unless Congress replenishes the trust fund.

The payment will be based on the cash in the Highway Trust Fund. The fund, which was created in 1956 to pay for the highway system, is expected to run dry at the end of August. The trust fund comes from federal gas tax revenue and can't keep up with demand as people drive less and consume less fuel.

States typically file receipts daily for reimbursement for infrastructure projects, but under this cash management plan, states will be reimbursed only twice a month.

The first reimbursement would come after Aug. 11, and Iowa would receive 1.25 percent of the total allocation, according to Foxx's letter.

Anderson said about $1.2 billion would be disbursed nationally each period, of which Iowa would receive about $15 million.

That's well short of the $35 million to $40 million worth of eligible costs estimated for that time period in Iowa, and that would be just for the first round of reimbursements, Anderson said.

But, there are two pieces of good news, Anderson said.

First, Iowa expects that money eventually will be repaid.

'The important piece is we are still owed that money, and the expectation is when Congress does a fix we would be repaid that money with interest,” Anderson said. 'We view this as short-term impact.”

Secondly, despite the large funding gap, Anderson said the state should be able to absorb the shortfall.

There's some question on how local jurisdictions counting on federal money will be affected, but the DOT is looking at ways to mitigate the effect by possibly directing the reduced federal amount to city and county projects first.

'We don't believe there will be any impact for any projects underway right now,” Anderson said. 'Even with these actions the U.S. DOT is planning to take beginning Aug. 1, we don't believe it will have any impact on projects underway. We should be able to reimburse contractors on schedule.”

Officials in Cedar Rapids, Iowa City and Linn County said they don't anticipate the reduced federal funding will hit home anytime soon.

'Nationally, some counties across the nation have just put projects on stop,” said Linda Langston, a Linn County supervisor. 'In this county, I don't think we are going to have that sort of problem. Highway 100 is the only big one, and the city and state have planned for how to handle it.”

Dave Elgin, the Cedar Rapids public works director, said the money is already accounted for on federally funded projects in progress, such as First Avenue construction, and there's no new projects that would be delayed.

Kent Ralston, a transportation planner for Iowa City, said if the Iowa DOT is not able to cover the federal funding losses, the city will have to rely more on property taxes to cover the gap, push some future projects back and defer maintenance.

'It'll probably be a mix of both,” he said.