It was an offer that the people of Colorado couldn't refuse.
Three years ago, the newly elected Gov. Bill Owens pitched a plan that, he said, would speed up highway construction across the state. All the voters had to do was agree to let the state government borrow some money to get the work started.
And best of all, the plan would benefit all of Colorado -- not just the heavily populated Denver Metro area, which many Coloradans believed had been getting more than its fair share of state highway dollars.
Fed up with Colorado's aging, crumbling roads, the voters bought Owens' promise and approved a referendum in 1999 to borrow up to $1.7 billion against expected future revenues to jump-start 24 critical highway projects across the state. For Owens, the new transportation funding mechanism was a big victory -- and one that he has touted during his re-election campaign this fall.
But in fact, the Owens administration's highway plans are in shambles.
The borrowing strategy, known as TRANs (short for Transportation Revenue Anticipation Notes), will fail to accelerate most of the projects it was supposed to target, the administration's own numbers now indicate. Late last month, the Colorado Department of Transportation informed leaders statewide that due to the downturn in the economy, much of the highway money they had been promised won't be available anytime in the near future.
Among those left in shock by this news were officials from El Paso County, who had been promised funds for three critical projects: one that would expand Powers Boulevard in Colorado Springs, and two that would upgrade sections of Interstate 25 through the metro area.
As was initially reported by the Independent on Oct. 17, those projects have only received partial funding. Meanwhile, the remaining funding that had been promised -- more than $502 million -- has evaporated.
Though voters were promised the borrowing mechanism would speed up the completion of I-25 through the Springs from 2009 to 2007, the state now says no more money will be forthcoming for any of the local projects until at least 2010.
"It sounds to me like we're holding an empty bag," said Colorado Springs City Councilman Jim Null, when he learned of the news at a meeting earlier this month of the Pikes Peak Area Council of Governments, which coordinates regional transportation planning. "We did not get the TRANs money."
So where did the funds go? As it turns out, about half of the total TRANs funds that were designated to help projects throughout Colorado has so far been gobbled up by T-REX, the gigantic project that is underway to expand I-25 through southeast Denver. The full scope of T-REX wasn't announced until after TRANs had passed. Now, not only has the project been fully funded; it has received at least $200 million more than voters were told it would cost.
And though T-REX is the only project to have received such a massive increase in funding, it's not the only project whose cost estimate has grown. The total estimated cost of the projects promised under the TRANs initiative, originally listed at $4.5 billion, has mushroomed to between $8.5 billion and $11 billion.
In El Paso County, the remaining projects that were to be accelerated by TRANs, originally estimated at $774 million, could end up costing more than $2 billion. Now, local planners worry the projects may never be completed, unless the scope of work is reduced or local taxpayers somehow cough up more money.
"We were promised the money and it got yanked back," said Fred Van Antwerp, director of the Pikes Peak Area Council of Governments. "We will have to develop some kind of a plan; we don't know what the impacts will be."
The highway-funding fiasco has lately become a hot political topic in local election campaigns. Democrat Mike Merrifield has used the issue to hammer Dan Stuart, his Republican opponent in the close race for state House District 18. Stuart serves on the state Transportation Commission, which sets policy and decides how transportation projects will be funded across the state.
Paved with dreams
In 1996, the state Transportation Department identified 24 highway improvement projects around Colorado as top-priority projects.
At the time of the 1999 referendum, the total list of projects, called the "Seventh Pot," was estimated to cost approximately $4.5 billion. Though many voters may have believed the referendum would fully fund the projects, it actually called for borrowing just $1.7 billion -- with a repayment cost of up to $2.3 billion, which would be applied toward the total cost.
For the plan to work, regular state and federal highway funds would need to cover the rest of the cost. But the idea was that by borrowing some of the money up front, almost all of the projects could be completed sooner -- and therefore cheaper, since construction costs increase each year.
In Colorado Springs, the Powers project would be completed by 2012, two years ahead of schedule; and I-25 would be completed in 2007, also two years ahead of schedule, voters were told.
So far, the state has borrowed $1.25 billion under TRANs, all of which has now been spent. But instead of benefiting all two dozen projects equally, most of the money has been applied to just a handful of them, most notably the giant T-REX project. In fact, only eight of the projects are now on track to receive full funding.
According to the Transportation Department, projects were funded in the order that they were ready to proceed. T-REX got funded, they say, because it was one of the first ones ready to go -- a contract was signed for the work last year.
But before many other projects could be funded, the state's economy tanked. While the state still had TRANs money, the other state revenues earmarked for the 24 top-priority projects were wiped out. As a result, all projects that had not yet been funded were put on hold indefinitely.
"There's just no money to do what's left on the list," said Rob MacDonald, transportation director for the Pikes Peak Area Council of Governments.
A spokesman for Gov. Owens, Dan Hopkins -- who served as the Transportation Department's spokesman at the time of the 1999 referendum -- referred questions for this story to state Transportation Director Tom Norton.
Norton, in an interview, said that contrary to widespread perceptions, the TRANs program is working just fine.
"We are exactly on schedule," Norton said, a claim that is contrary to information provided directly from the department that he oversees, as well as from those who have been notified that the funds have dried up.
"Colorado Springs has not been shortchanged," Norton maintained.
Specifically, Norton and Transportation Commissioner Stuart argue that the money is still there -- though delayed -- and blame the recently announced delays on a downturn in the economy. Those claims belie the premise that voters bought in 1999 -- that the TRANs initiative would speed up project funding.
The state Legislature, Norton says now, has been unwilling to "cut anything else" in the state budget to come up with its portion of the money necessary to complete the strategic projects.
But Bill Thiebaut, the former Senate majority leader from Pueblo, says blaming the funding crisis on a lack of appropriations from the Legislature is a ruse.
"That has nothing to do with it, and I hope people aren't falling for that," said Thiebaut, currently the Democratic candidate for lieutenant governor of Colorado.
Given how TRANs project costs have mushroomed, there's no way the Transportation Department could stick to its schedule even if the Legislature had kept money flowing at a regular rate, Thiebaut argues.
Though some Democrats backed Owens' plan three years ago, many others argued the scheme was an irresponsible gamble based on the speculative assumption that the economy would always prosper.
"Borrowing against future revenue ... is not a good business practice," said Sen. Ron Tupa, vice-chairman of the Senate Transportation Committee. "[You're] banking on money that's not there."
Tony Marino, a Democratic candidate for state Senate District 11 in Colorado Springs, likens it to a "house of cards [that] has collapsed."
Thiebaut was among four state senators who rebelled in 1999 when Gov. Owens tried to pass the plan through the Legislature without a referendum. They successfully challenged Owens in court, arguing that a vote of the people is required for the state to incur debt.
"I voted against it wherever I could," Thiebaut said of the plan.
Word about the emerging crisis has been slow to get out. Thiebaut says he only heard about it two weeks ago and has been working since then to get more information.
"A lot of transportation gurus across the state knew," Thiebaut said. "But they're afraid to say something." The fear, he said, is that they'll lose support for local projects. "They don't want to make waves."
'A dollar is a dollar'
Indeed, local officials learned about the funding shortfall just a few weeks ago on Sept. 26 at a statewide meeting of transportation planners. Pikes Peak Area Council of Governments transportation planner Rob MacDonald said many were struck by the fact that, while other projects were being placed on hold, T-REX had not only been fully funded but had, in fact, received more than the cost presented to voters in 1999.
The official voter guide for the 1999 referendum, known as the "blue book," had listed the cost of T-REX at $593 million. But in a memorandum distributed earlier this month, the Transportation Department indicated it has committed $849 million to the project.
Two weeks ago, after the Independent inquired about the additional quarter-billion cost to T-REX, the transportation department retracted its own figure, saying it was an error. The correct figure, according to Stuart and department staffers, is $795 million, still far higher than its original estimated cost.
Either way, some local officials concluded that money promised for projects in Colorado Springs had been siphoned off to Denver.
"[The money] has gone into T-REX," complained Springs City Councilman Null, who also serves on the board of the Pikes Peak Area Council of Governments.
Norton denies that's the case. "It really has nothing to do with T-REX," he said.
However, Laurie Freedle, the Transportation Department's budget manager, acknowledged that when appropriations from the Legislature dried up, the department did redirect TRANs money earmarked for other projects and funneled it into to those projects that were already under contract -- mainly T-REX.
In fact, of all the money borrowed so far, roughly half -- $621 million -- has gone into T-REX, Freedle acknowledged. Meanwhile, only $49.5 million went to El Paso County projects.
Freedle downplays the importance of those numbers, saying it was simply a matter of shifting money around. When T-REX got more of the borrowed money, it meant that other projects could get more from general appropriations, she says.
"A dollar is a dollar, and it should not matter the source of that dollar," she said.
Transportation department officials deny that T-REX is over budget, saying the entire $200-million increase is due to inflation in construction costs. The costs listed in the blue book were estimates based on "constant" year 2000 dollars, but the T-REX project won't be completed until 2008, so inflation has to be added, Freedle says.
The department now estimates that the total cost of the 24 projects in the blue book, originally listed at $4.5 billion, could reach between $8.5 billion and $11 billion. It all depends on when they are completed, which in turn depends on how soon funding becomes available.
All of the increased cost -- whether it's T-REX or any of the other projects -- is entirely due to inflation, Norton insists. None of it, he says, is due to increases in work scope.
Norton says he made it "exquisitely clear" in 1999 that numbers for all of the projects would grow over time.
"I gave over 100 speeches and made it perfectly clear," Norton said.
But outside the department, few are buying those arguments.
"That's baloney," said Thiebaut.
Local officials and transportation planners throughout the state -- from Pueblo to Grand Junction -- say they, as well as voters, were led to believe the blue book numbers were complete estimates that included inflation.
"The original $4.5 billion was supposed to include inflation," said Bill Moore, senior transportation planner for the Pueblo Area Council of Governments. "And now, it's 'No, no, no -- we're supposed to add inflation.' "
Richard Skorman, a Colorado Springs city councilman and vice-chairman of the Pikes Peak Area Council of Governments, concurred.
"We all understood that those were inflated figures," Skorman said of the original estimates. But since then, the numbers seem to have changed many times, he added. "To me, it feels a little bit like fuzzy math."
Many observers also say they believe the scope of the projects, including T-REX, has in fact changed.
"To me, it appears that the Seventh Pot projects have grown," said Bill Vidal, who preceded Norton as transportation director. "Clearly, there's been some additional things."
However, Vidal, now the director for the Denver Regional Council of Governments, said it's difficult to know for sure exactly what has happened, because it's hard to get information from the Transportation Department.
"We don't have a clear sense," Vidal said. "I've seen several different amounts for T-REX in different tables."
Where's the pea?
Meanwhile, Tupa of the Senate Transportation Committee expressed frustration over what for them has become a key part of the problem -- the difficulty in getting accurate and consistent figures from the Transportation Department.
Tupa called Transportation Department officials "adversarial" and said that when they do provide information to the committee, it's not reliable.
"We have learned that you can't really rely on these figures, because some are pure speculation," he said. "They will tell you whatever they want to tell you."
Ken Simms, a Grand Junction transportation planner, says no one seems to really know how the department arrived at its original estimates for the 24 projects. "There's not a lot of documentation," he said.
Councilman Null said he was "exasperated" by all the conflicting and confusing information he's received from the department.
"I quite frankly can't tell where the hell the pea is -- which shell it's under," Null said.
Norton, however, says he was unaware that anyone was having trouble getting information.
"They haven't called me," Norton said. "I will talk to anyone at any time and give them the information, and open the books to them. ... I've offered to sit down with any legislator."
A bad time
Many local officials are grumbling amongst themselves about the TRANs fiasco. However, so far at least, the news hasn't received widespread publicity.
Undoubtedly the vanished highway funding comes at a bad time for many political candidates -- including Dan Stuart and even Gov. Owens himself -- who have touted TRANs and local highway money among their "successes."
Democrats charge that the Republican administration is trying to downplay the funding crisis until after the upcoming elections.
"There's continuing to be an effort to keep a lid on it," complained Merrifield, the Democratic candidate running against Republican Stuart in House District 18.
Merrifield himself, however, has latched onto the issue. After all, during the campaign, Stuart has boasted extensively -- including on mailers sent to district voters -- about his experience as a regional representative on the state Transportation Commission.
Merrifield is now asking why El Paso County's highway money vanished on Stuart's watch, suggesting Stuart failed to look after local interests and failed to ensure promised highway funds were indeed funneled to El Paso County.
"He could have been more aggressive," Merrifield said.
Stuart, meanwhile, downplays the news, and calls it a "misperception."
"It sounds to me like my opponent wants to blame me for the downturn in the economy," Stuart said.
While Stuart and Norton dispute that El Paso County's money has disappeared, MacDonald, the transportation planner for the Pikes Peak Area Council of Governments, is dealing with a different reality.
"We're going to have to look at: What does it mean to lose half a billion dollars in six years?" MacDonald said.
In the end, MacDonald said, local officials will probably have to revamp their entire 20-year transportation improvement plan for the Pikes Peak region, which was adopted just six months ago.
Fighting over scraps
And, though the highway-funding crisis is just beginning to show up on the political radar screen, it promises to have significant fallout both statewide and locally.
Thiebaut says that by making the promise in 1999 -- which it now can't keep -- Owens' administration has created an expectation that the 24 projects will be completed one way or another. That means there will be enormous pressure to somehow come up with the money, which in turn means that other pressing state needs may be neglected in the process, he says.
Moreover, much of the limited transportation funding that's still available will have to be spent on repaying the money that was borrowed.
"We've lost, fundamentally, the ability to prioritize the needs of the state," Thiebaut said. "We've mortgaged our future."
Meanwhile, local officials will be left fighting over scraps. The Transportation Department hopes to borrow another $200 million next year, which would be the final amount borrowed under TRANs. But that won't go far in meeting a project list of several billion dollars.
For El Paso County, the consequences could be dramatic. If Powers Boulevard isn't expanded, traffic congestion might grow to the point where the Springs metro area falls out of compliance with federal air-quality standards, MacDonald estimates.
That, he says, could make an already disastrous funding situation even worse, because failure to comply with air-quality standards could mean the loss of matching federal funds.
"The biggest downside is we can't meet air quality," MacDonald said.
Councilman Skorman called the air-quality issue "very serious," saying that to meet standards, "We may have to go to the taxpayers and ask them to foot the bill."
Tom Huffman, chairman of the El Paso County Board of Commissioners, says there's no way the county will be able to come up with money to make up for the shortfall. And while some legislators will probably propose increasing state highway funding,there isn't much flexibility in the state budget, either, he noted.
In the end, projects may not be funded to the levels promised, Huffman fears.
"There's not a lot of wiggle room," he said. "So what I think you're going to see initially is projects being pared down."
Our unfair share
Though most observers agree that the TRANs referendum won't come close to fulfilling its grand promises, the jury still seems to be out on whether it still served some useful purpose.
Some local planners -- including ones that have criticized aspects of the referendum -- say they have benefited from it.
Simms, the Grand Junction transportation planner, says a project in his region, to widen U.S. Highway 50 between Grand Junction and Delta, has been sped up thanks to the referendum.
"It did help us," he said.
And Vidal, the former state transportation director, said he continues to believe it was a good concept.
"I still think it was a good business decision to borrow the dollars," Vidal said. "Clearly, though, it hasn't worked out in accelerating the Seventh Pot the way we thought it would when we voted for it."
But as for Colorado Springs, it hasn't really helped at all, MacDonald said.
"TRANs certainly accelerated a couple of projects, [but] locally, we didn't advance anything," MacDonald said. "There was no benefit."
A breakdown of the status of projects promised to voters under the 1999 TRANS referendum.
Project Location Cost*
T-REX Denver $795 million**
State Hwy 82 Eagle, Garfield & Pitkin Cos. $208 million
I-70 Eastern Plains $131 million
I-25 & I-70 interchange Denver $108 million
I-225 & Parker Rd. interchange Aurora $93 million
I-25 & U.S. 50 interchange Pueblo $69 million
U.S. 285 Jefferson Co. $66 million
I-76 & 120th Ave. interchange Adams Co. $46 million
*) actual funds committed
**) original estimate was $593 million
Project Location Cost***
I-70 Denver to Eagle Co. $4 billion
I-25 Denver to Ft.Collins $966 million
I-25 (segment 1) Colo. Springs $762 million
I-25 (segment 2) Colo. Springs $720 million
Powers Blvd Colo. Springs $671 million
I-70 & U.S. 6 Denver $563 million
U.S. 287 Eastern Plains $436 million
I-25 Denver, Arapahoe & Douglas Cos. $333 million
I-25, U.S. 36 & State Hwy. 270 Adams Co. $249 million
U.S. 160 (Wolf Creek Pass) Mineral Co. $176 million
State Hwy 160 La Plata Co. $154 million
U.S. 40 (Berthoud Pass) Clear Creek Co. $140 million
U.S. 550 La Plata Co. $118 million
I-25 Weld Co. $109 million
U.S. 50 Mesa Co. $106 million
U.S. 287 Boulder & Larimer Cos. $105 million
***) Current estimates based on completion by the year 2020
SOURCE: Colorado Department of Transportation