Strategic Mobility Formula – HB 817

Cap on the Gas Tax

Budget Funding Highlights

Increased Outsourcing Requirements for Engineering Work

Life Cycle Cost Study

Bicycle Pedestrian Projects

Turnpike Projects/Tolling

Quality Based Selection

Charlotte Airport

Global Transpark Infrastructure and Rail Study

For a printer friendly version 
please click HERE.

Don’t miss Jim Trogdon, PE, Chief Operating Officer at NCDOT 
at the PENC Regional Conference in Charlotte – August 29th. 

Click HERE to Register!

PENC Leadership
William A. Roberts, PE
Duke Energy

Neil T. Deans, PE
Kimley-Horn & Associates

Past President
William G. "Gus" Simmons, PE
Cavanaugh & Associates PA

Mark McIntire, PE, BCEE, CRM 
Progress Energy

Nathan Epling, PE
Blue Ridge Parkway

Directors At Large:
Paul Shivers, PE
Highfill Infrastructure

Susan Habina Woolard, PE
City of Charlotte Department of Transportation

Tom Bach, PE
Water and Sewer Authority of Cabarrus County

CEO & Executive Vice President:

Betsy Bailey, CAE
Professional Engineers
of North Carolina

(919) 834-1144

Professional Engineers
of North Carolina

1015 Wade Avenue, Suite A

Raleigh, NC 27605




Has your company purchased its listing in the NC Engineering Directory yet?

Click HERE for more information!

By the end of the 2013 General Assembly Legislative session on July 26:

1023 House bills had been filed

728 Senate bills had been filed

As of today: 

299 bills have been signed by the Governor (including the Strategic Mobility Investments Legislation – HB 817)

1 bill became law without the Governor’s signature

38 bills remain on the Governor’s Desk

The following analysis and review includes only those bills and budget actions affecting Transportation.  Additional reviews will be provided for Environment, Energy, Construction, Economic Development, and Professional Licensure over the next week. 

Strategic Mobility Formula - HB 817 

By far, the transportation highlight of the recent legislative session was the enactment of the Governor’s Strategic Mobility Investments legislation – HB 817.  This legislation put in place a new way to distribute transportation dollars across the state replacing the Equity Formula that was established in 1989 under the Highway Trust Fund.

The new formula will apply a new prioritization process to ensure that projects that are funded are those that provide the maximum benefit to our state.  Using existing revenues, the new formula is expected to create jobs and boost the economy by funding those projects with the most economic potential. 

All modes will compete for funding in one of three categories:  statewide, regional and division levels.

Statewide level projects will receive 40% of the available revenue or $6 billion over 10 years.  The project selection process will be 100% data driven.

Regional level projects will receive 30% of the available revenue or $4.5 billion over 10 years based on regional population.  Projects on this level compete within specific regions made up of two NCDOT Transportation Divisions.  Data will comprise 70% of the decision-making process and 30% will be based on local rankings by area planning organizations and the NCDOT Transportation Divisions.

Division level projects will also receive 30% of the available revenue or $4.5 billion shared equally over NCDOT’s 14 transportation divisions.  These projects will address local concerns like safety, congestion and connectivity and will be rated 50% data and 50% local rankings.

The new formula is expected to be fully implemented by July 1, 2015.  Projects funded for construction before then will proceed as scheduled; projects slated for after that time will be ranked and programmed according to the new formula.  NCDOT must report to the Joint Legislative Transportation Oversight Committee no later than August 15 of this year on their recommended formulas that will be used in the prioritization process to rank projects. 

What this Means for Engineers – Full implementation of the Strategic Mobility Formula could mean larger projects (i.e., projects that cannot be performed in-house,) would be given a higher priority and, therefore, accelerated.  It’s reasonable to assume more work would be outsourced and available for transportation consultants. 


Cap on the Gas Tax

Both the 2013-14 budget and the new tax reform plan cap the gas tax at 37.5 cents effective October 1, 2013 through June 30, 2015.  Capping the tax means the state will forgo $2.56 million in revenues in the current fiscal year.  Although there is no significant adverse impact expected in the short term, given the erosion of the gas tax as a sustainable revenue source, future caps could significantly imperil NCDOT’s ability to fully fund their work program. 

The Motor Fuels Tax is the largest source of revenue for the Highway Fund (about 75% of the total transportation budget).  The rate has a fixed portion and a variable portion that is adjusted every six months based on the price of fuel.  Capping the tax will limit the amount of revenue that NCDOT can collect when the price of fuel increases.  Data show that there’s almost no correlation between a state’s gas tax and the price at the pump.  Virginia’s tax is 20 cents a gallon lower than in NC yet the price at the pump in VA is only 5 cents less.  And in Georgia the tax is 30 cents lower yet their retail price is actually higher than in NC. 

What this Means for Engineers – Any cap on the gas tax that has the effect of reducing revenue will impact the ability of NCDOT to complete their work program and could result in project delays.  However, this short term cap should not interfere with project delivery. 


Budget Highlights

Overall, the transportation budget is expected to grow over the next few years.  The Highway Fund is expected to grow from $1.9 billion in FY 2015-16 to $2.1 billion in FY 2018-19 (based on increases in the price of fuel) and the Highway Trust Fund to remain flat at $1.2 billion through FY 2018-19.  While modest growth in revenue is encouraging, the projected need still far surpasses revenue projections. 

Another significant source of funding that previously funded the Highway Trust Fund but will now be allocated to the new Strategic Mobility Fund is the Highway Use Tax.  This tax of 3% applied to automobile dealer administrative fees in addition to the retail value of the motor vehicle will remain the same and has not changed since it was enacted in 1989 to fund the Highway Trust Fund projects. 

Electric vehicles will now be assessed a $100 surcharge and hybrids will be charged $50 for additional revenue of $60,000 in the first year and $120,000 in the second year. 

The NC Railroad will now pay a dividend of $19.2 million in FY 2013-14 and $3.75 million in FY 2014-15 to the Freight Rail and Rail Crossing Safety improvement Fund.

The Secondary Road Construction Program has been reduced in FY 2013-14 and in FY 2014-15 will be renamed to the Unpaved Secondary Road Paving Program.  The total budget is $27 million in FY 2013-14 and $12 million in FY 2014-15.  The Department will allocate $12.0 million recurring beginning in FY 2013-14 for the paving of unpaved secondary roads based on the statewide prioritization list. 

The Division of Small Urban construction will receive $5 million in non-recurring funds in each of the two fiscal years. 

Contract Resurfacing is increased by $145 million in FY 2013-14 and by $127 million in FY 2014-15 for a total budget of $433 million and $402 million respectively.

System Preservation is increased by $101 million in FY 2013-14 and $75 million in FY 2014-15 for a total budget of $180 million and $153 million respectively.  The budget requires this money to be spent on structurally deficient and functionally obsolete bridges.  All projects funded under this section, with the exception of inspection, pre-engineering, contract preparation, contract administration and oversight, and planning activities must be outsourced to private contractors. 

Small construction and Contingency Funds will receive $5 million for projects recommended by the Chief Engineer, Chief Operating Officer and Transportation Secretary split equally among the 14 highway divisions.  $12 million has been allocated statewide for rural or small urban highway improvements as approved by the Secretary.

The Economic Development Program Fund will receive $3.8 million in FY 2013-14 and $4 million in FY 2014-15 for projects that expedite commercial growth as well as job creation/job retention projects approved by the Secretary of Transportation and Secretary of Commerce.

The budget requires NCDOT to study the level of congestion throughout the primary highway system based on traffic data and a ranking of the most congested areas based on travel time reliability and average number of congested hours.  The budget also calls for a report on significant variations in system conditions among highway divisions.

Aviation will receive $6.5 million for aviation related economic development projects. Funding for grants to airports will be reduced to $20 million recurring, a reduction of $2.3 million from FY 2012-13. 

Ferry Tolling – the budget allows the ferries to sell ads and concessions in addition to tolling.  The BOT will establish tolling guidelines including minimum and maximum rates.  Existing tolled routes remain tolled.

Shallow Draft Dredging is funded by reducing Highway fund revenue by reducing Highway Fund revenue by $2,280,350 in FY 2013-14 and $2,193,500 in FY 2014-15. 

The budget makes conforming changes to the Highway Trust Fund to align with the new Strategic Prioritization Program. 

100 vacant positions will be eliminated across the Department in FY 2013-14 and a total of 400 vacant positions by FY 2014-15.  Of these, the Department shall eliminate a minimum of 17 vacant administrative positions in the first year and 34 in the second year. 

Increased Outsourcing Requirements for Engineering Work

The Department is required to increase the outsourcing of all activities performed by the Preconstruction and Technical Services units to between sixty and sixty-five percent of the total cost of activities performed by those units by the end of the 2013-2015 fiscal biennium, excluding the cost of activities performed by the Turnpike Authority, the Structures Design and Management unit, and the Bridge Program.

The Right of Way, Project Development and Environmental Analysis and Roadway Design units are required to increase the total cost of outsourced activity by five percent in FY 2013-14 and by an additional five percent in FY 2014-15 from a baseline of FY 2012-13 actual expenditures for those units. 

The Department is also required to increase contracts for construction of transportation projects on a design-build basis.  

Progress towards implementing the requirements of outsourcing shall be reported to the Fiscal Research Division of the General Assembly and the Joint Legislative Transportation Oversight Committee before the convening of the 2014 session (May, 2014).


Life Cycle Cost Study

Over the past two years, Carolinas Ready Mix advocates have argued that the use of Life Cycle Cost analysis would encourage higher use of alternative pavements i.e., concrete that last longer and presumably would result in savings over a period of time.  Their arguments gained some traction during this past budget session and they were successful in adding language that will require NCDOT to do a study on their use of Life Cycle Cost Analysis.  The study will require NCDOT to report on its life cycle cost analysis methodology and component factors used to comply with federal requirements to the Legislative Fiscal Research Division and the Joint Legislative Transportation oversight Committee no later than February 1, 2013. 

What This Means for Engineers – PENC is opposed to this study and any legislative directive that may result in mandating the type and amount of materials that must be used in road construction projects. Additionally, NCDOT has used a formal LCCA procedure since 2000.  Implementing a new LCCA process now, based on flawed data and analysis from previous consultant studies, could actually increase costs.  According to NCDOT, concrete pavement is not currently competitive for most 4 lane new location urban interstates or 4 lane new location rural interstates.   At the current prices, liquid asphalt would have to double from their current averages for concrete pavement to be competitive using the draft LCCA analysis that the Carolinas Ready Mix advocates propose. 

Bottom line – Engineering decisions should not be legislated by mandating processes that may favor one industry over another.   


Bicycle Pedestrian Projects

The original version of the Senate budget eliminated state match for federal Bike/Pedestrian grants and included a provision that eliminated the ability of local governments to use STPDA discretionary funds on bike/pedestrian projects. The Senate instead authorized the use of Powell bill funds to fund these projects under the new Strategic Mobility Formula guidelines.  While this may be an option for the future, the immediate concern was for current projects that were already approved in the STIP and the impact this provision would have on these projects.

PENC and other stakeholders voiced their concerns to Senator Rabon and others involved in the budget negotiations and HB 817 and they agreed to grandfather those projects in the STIP scheduled for construction as of October 2013 through 2015.  All of these projects will still be eligible for the state match.

What This Means for Engineers – With the passage of HB 817 – Strategic Mobility Investments, independent bike/ped projects can still compete for state funds at the Division level or local governments may use their Powell bill funds.  However, the bill clearly signals the intent to shift state funds away from bike, pedestrian and public transportation and require local governments to fund these programs.  Any engineering firms invested in this type of engineering work will need to work closely with local governments to ensure continued funding.  This provision does not affect any bike and pedestrian projects that are funded in concert with a road project i.e., complete streets.


Turnpike Projects/Tolling

With the passage of HB 817 and the new Strategic Mobility Formula methodology that requires all project s to be prioritized at the Statewide, Regional or Division level, funding was eliminated for the Garden parkway and Mid-Currituck Bridge projects.  These projects will now compete for funding under the new formula. 

HB 817 made several changes related to tolling.   The bill allows NCTA to designate one or more lanes of highway, or portions, including lanes that may have previously been designated as HOV lanes, as HOT lanes or other managed lanes provided that the designation does not reduce the number of existing general purpose lanes.  While this would appear to restrict the tolling of existing capacity on I-95, for instance, other references in the bill give NCDOT/NCTA the authority to toll existing capacity as long as certain conditions are met and the affected MPOs and RPS approve of the project

HB 10 – Remove Route Restriction for 540 Loop cancels the legislature’s “Red Route” study ban, which had prevented NCDOT from winning regulatory approval of any route for the next leg of the Triangle Expressway. 

In 2011, opposition to the Red Route grew so loud that lawmakers blocked state transportation officials from even studying it. But that prohibition conflicts with federal highway funding rules, and would trigger the federal government to cut off funding for the highway. House Bill 10 repeals the prohibition on studying the route. Top lawmakers say the route will never be built, but it must be studied in order to draw down federal funding.

Quality Based Selection for Transportation Projects

While HB 857 – Design Build/Public Private Partnerships did not pertain to transportation projects, a key provision on Quality Based Selection was included in this legislation that affects NCDOT or any transportation projects performed at the local level.  Specifically, NCDOT or units of local governments may no longer exempt themselves from Quality Based Selection unless the proposed project estimated professional fee is $50,000 or less. 


Charlotte Airport

In less than 24 hours, the General Assembly rewrote the law governing Charlotte's airport.  A bill that did not exist as of 10:15 a.m. the day before session adjourned deletes a law passed earlier this month that turns control of the airport over to a regional authority. City leaders have sued over that measure. At first glance, the new bill appears to be a win for the city. It makes the airport a department of the city, although it gives the commission control over the airports finances.  The bill becomes law because it is a local bill, which is a type of measure not subject to the governor's signature or veto.

Under the new plan, a 13-member commission would run the airport, with seven of the 13 members appointed by the city. The city would retain approval of bond issuance and eminent domain. But the commission would oversee daily operations, control airport finances, and would hire and fire the aviation director and other employees. Under the bill, the commission's first aviation director would be the airport's leader on Feb. 14, which would restore longtime Aviation Director Jerry Orr to his position. His initial compensation would be the same he received in February and he would be entitled to a continuation of his retirement benefits. Under the earlier legislation, an 11-member Charlotte Airport Authority with only four appointments by the City Council and mayor would have taken ownership and control of Charlotte Douglas

Charlotte officials on Monday declined to accept the General Assembly’s plan to create a commission to run Charlotte Douglas, and said a letter from the FAA bolsters its position that the state’s plans for the airport should be stopped in court. The next step in the airport battle comes Thursday morning (tomorrow), when the city will seek an injunction against the legislation that transfers operational control of the airport from the city. The letter from the Federal Aviation Administration — as well as the city’s continued hardened position — raises the possibility of an extended legal fight over Charlotte Douglas. The FAA said it has “several concerns” about the recently passed bill. It also said that until it makes a decision on the transfer, “the city of Charlotte remains the airport sponsor and the certificate holder.” That reaffirms that, for now at least, the city still runs the airport.

Attorneys for the Charlotte Airport Commission say the city’s efforts to stop it from running the airport are “utterly baseless” because the state is no longer removing airport ownership from the city, according to a court document filed Tuesday.  The city argues the legislature’s action is unconstitutional.


Global Transpark Infrastructure and Rail Study

NCDOT in collaboration with the Departments of Commerce and Agriculture shall study the feasibility of infrastructure and access improvements for the Global TransPark and NC State Port Authority.  The study shall 1) evaluate infrastructure improvements that will promote job creation and commerce and advance development of the Global TransPark 2) Perform financial feasibility analyses for each infrastructure improvement 3) Assess highway and rail infrastructure improvements or service scenarios that improve access and throughput to the Global Transpark and NC State Port Authority Morehead City Terminal 4) Perform a financial feasibility analysis of the Wallace to Castle Hayne and Wilmington track restoration project.

A preliminary report shall be presented to the Joint Legislative Transportation Oversight Committee no later than March 1, 2014 and a final report no later than January 1, 2015.

Additional updates on Environment, Energy, Building Construction, Professional Licensure and Business will be distributed over the next week.

As always, if you have any questions, please contact me at or 919-834-1144 ext. 1