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History and Introduction to the Regional Freeway System Life Cycle Program

On October 8, 1985, voters in Maricopa County approved Proposition 300 (Prop 300) to create a Regional Area Road Fund (RARF) to be funded with a half cent transportation excise tax (commonly called the half cent sales tax) for twenty years through December 31, 2005. The tax was to be used for construction of new controlled-access highways and freeways that were approved in the Maricopa Association of Governments (MAG) Regional Transportation Plan (RTP) and part of the Arizona Department of Transportation (ADOT) State Highway System. While planning for the system is done largely by MAG, the facilities are designed, constructed and operated by ADOT. In addition to the Prop 300 tax, the freeways are also funded with ADOT Highway User Revenue (HURF) funds and Federal highway Funds that are allocated to the MAG area.

In 1991, the ADOT Regional Freeway System (RFS) office was established to provide centralized internal staff coordination and information relative to revenue forecasts and construction costs for the Life Cycle Freeway Program. The concept of a Life Cycle program refers to a systematic approach that forecasts revenue and costs not just for the usual five year construction program, but through the full life of a major funding source, in this case the half cent sales tax. The intent is to help ensure that anticipated costs and revenue stay in balance so that MAG and ADOT can maintain realistic planning and construction schedules based on available revenue and to provide periodic reports to the public and other government entities. As part of the Life Cycle program, the ADOT Regional Freeway System office prepares a Certification in January and July each year to report on work that has been accomplished to date, work in progress, and updated estimates of anticipated revenue and costs for the remainder of the program.

On November 8, 1994, voters of Maricopa County defeated Proposition 400 which proposed to extend the existing half cent sales tax another 10 years (through 2016) and add an additional half cent sales tax to be used for public transportation purposes.

On December 13, 1994, then Governor Symington presented a plan to complete the Regional Freeway System (RFS). That plan included additional funding from higher sales tax forecasts, a greater allocation of MAG Federal funds to the RFS and ADOT generated budget savings. The plan further recommended deletion of certain corridors and corridor segments, proposed higher bonding levels and included corridor scope reductions to lighting, landscaping, structure widths and freeway lanes.

On November 20, 1996, MAG Regional Council approved a Freeway / Expressway Plan for the Life Cycle Program, FY 1998-2006, to advance existing projects, add a Grand Avenue Improvement Project, add a project to complete the I-10 / Santan / South Mountain Traffic Interchange, and add a “set aside” project for a South Mountain expressway in lieu of a toll road. Also on November 20, 1996, MAG Regional Council identified funding for a Long Range Plan, FY 2007-2015. Previously unfunded projects, including the Red Mountain, Santan, and Sky Harbor segments were prioritized and a Grand Avenue Improvement Project was added and prioritized.

In April 1999, the State Legislature passed SB 1201 which provided State Infrastructure Bank (SIB) funding to assist in financing the acceleration of the Regional Freeway Program by the end of 2007. Then Governor Jane Dee Hull, ADOT and MAG prepared plans to complete the Regional Freeway System by the end of 2007 using innovative financing alternatives. The “2007 Acceleration Plan” was developed in conjunction with the MAG and other local agencies.

Arizona House Bill 2292, which was passed by the State Legislature in the spring of 2003, established the Transportation Policy Committee which was tasked with developing a Regional Transportation Plan for Maricopa County. Significantly, it also set the framework for an election to extend the half cent sales tax and on November 2, 2004, voters in Maricopa County approved Proposition 400 to extend the tax for another twenty years through December 31, 2025. Under Prop 400, 56.2% of the tax is used for freeway and highway improvements, 10.5% for arterial street improvements, and 33.3% for public transportation improvements including Light Rail.

Arizona House Bill 2865, passed in the spring of 2006 by the State Legislature, established and provided $307 million for the Statewide Transportation Acceleration Needs (STAN) fund to accelerate the design, right of way acquisition and construction or improvements to freeways, highways, bridges and traffic interchanges on the statewide highway system. The STAN account included $184 million to be used in the MAG regional area.

Arizona House Bill 2781, approved by the State Legislature in the spring of 2007, transferred an additional $62 million from the State Highway Funds to the STAN fund. It also extended from 20 years to 30 years the maximum term for bonds used to help finance the statewide highway improvement program.

However, this was followed in the spring of 2008 with Arizona House Bill 2620 which approved removal of $42 million from the STAN fund and transfer to the Department of Public Safety to help fund highway patrol costs. Also that same year, House Bill 2094 was approved which would allow the STAN fund to be used to pay for interest costs resulting from bonds, loans, notes or other obligations issued or incurred or advances made by or on behalf of a city, town or county.

Faced with steeply falling revenues, Arizona Senate Bill 1001, approved in the spring 2009 session, removed $104 million from the STAN account for transfer to the State General fund to assist with the FY 2008-09 state budget shortfall. Of that total, $94 million had been earmarked for the MAG RTP Freeway Program.

However, on a more positive note, due to the nationwide economic situation, on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA) which provided $27.5 billion in nationwide infrastructure improvements. The ADOT highway portion of ARRA came to $349.7 million, which included $129.4 million for construction and improvements for the MAG area regional freeway program.

Even with this much needed infusion of cash into the RTP Freeway Program, the Life Cycle process was still forecasting a gap of over $5 billion between revenue and costs by the end of the Prop 400 tax life in 2026. Accordingly, MAG took the lead in developing a new planning scenario to help rebalance costs and revenue. Some projects were deferred to future years beyond 2026, some were reduced in scope to fit anticipated revenue and needs, value engineering was used to identify cost savings in complex projects, and some costs were reduced simply due to lower prices related to the current economic conditions. On October 28, 2009, MAG Regional Council approved the proposed scenario to rebalance the program. MAG and ADOT have been working together since then to refine the scenario into a defined list of projects for the 5 Year Construction Program for FY 2011-2015 and a tentative long range project list through 2031. These proposals are now working their way through the process for approval by MAG and the ADOT State Transportation Board.

During times of economic prosperity and rapid population growth, revenue grew much faster than early forecasts. However, that same growth also helped fuel exceptional demand for construction labor and materials and helped drive costs higher than first anticipated. Population growth also created additional congestion on existing roadways leading to increased demand for additional freeway and arterial street traffic capacity along with improvements to the public transportation system. No forecast could have anticipated all of the growth and changes that have taken place since the inception of the freeway program in 1986. Nor did any economic forecast clearly foresee the current economic situation and the resulting drop in revenue used to help fund the RTP Freeway Program.

It is precisely these kinds of uncertainties that create a continuing need for the Life Cycle Freeway Program administered by the ADOT Regional Freeway System office. As the economy waxes and wanes, revenue and costs will change. Funding sources will come and go due to legislative and other changes. Priorities and needs will change to fit changing population and travel demands. While no forecasting model can clearly predict what the future will bring, the Life Cycle process of reviewing and certifying revenue and costs every six months helps to ensure that the program stays in balance and that MAG and ADOT have the information needed to make informed decisions concerning the planning, design, construction and operation of the MAG area regional freeway system.

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