HB 2025 doesn’t fix the Oregon Department of Transportation’s financial problem—it makes it even bigger
The bill promises more than it pays for, and will lead ODOT to start projects it can’t afford to finish–without shortchanging road repair, or causing further tax increases.
There is still no accountability at ODOT: It’s simply failed to present accurate data on how it will pay for promised projects. And HB 2025 provides nothing for virtually certain cost overruns on the IBR project
ODOT’s track record of persistent cost overruns, and wildly optimistic schedule, engineering and revenue estimates virtually guarantees an even bigger problem in the years ahead.
Oregon’s Legislature is debating HB 2025, a $14.6 billion tax and fee increase to provide more revenue for transportation. According to Oregon Public Broadcasting:
As it passed out of committee Friday evening, HB 2025 would have enacted the largest tax hike in Oregon history. Via an eventual 15-cent increase to the state’s 40-cent-per-gallon gas tax, a new 2% tax on new car sales, a new 1% tax on many used car sales, increases in titling and registration fees and other changes, the bill is expected to raise $14.6 billion in the next decade.
Ostensibly, the tax increase is needed to fill a giant budget hole at the Oregon Department of Transportation, and fix a backlog of road repair, transit and transportation needs. But far from fixing the underlying problem, HB 2025 actually promises to make it worse, and much bigger. ODOT’s real financial problem is prolific, persistent cost overruns on major highway expansion projects. Ironically the package promises even more highway expansions than it can pay for, effectively creating yet another financial time-bomb for ODOT.
How we got here:Â Massive cost-overruns on badly managed megaprojects
Let’s recall how we got into this mess: Back in 2017, the Oregon Legislature passed the last transportation package, it allocated funding for some “megaproject” including the I-5 Rose Quarter Freeway widening, then promised by ODOT to cost $450 million. The same law directed ODOT to start using congestion pricing on I-5 and I-205 in the Portland area, both to manage traffic, and also pay for highway widening. Based on hoped for toll revenues, ODOT embarked on the I-205 Abernathy Bridge project, estimated to cost $250 million.
All of this has turned out badly: the cost of the Rose Quarter has ballooned to $2.1 billion (and may go as high as $2.5 billion, according to one OTC commissioner). The Abernathy Bridge Project has more than tripled in price to $815 million (and ODOT concedes will go higher). At the same time, hoped for toll revenue has disappeared as Governor Kotek directed ODOT to shelve congestion pricing. That turned out to be especially problematic, because ODOT had raided money earmarked for the Rose Quarter to “temporarily” pay for Abernathy. On top of all this, the $450 million offered by the Biden Administration for the Rose Quarter would be rescinded by the US House passed version of the “Big Beautiful Bill.” And ODOT made its budget hole even bigger by over-estimating federal revenue to the tune of $1 billion.
These ODOT management, engineering and financial blunders are the real reason the agency is in such dire financial straights (even though it tries to pin the blame on electric vehicles and fuel-efficient cars). ODOT has both under-estimated its costs and over-estimated its revenues.
How HB 2025 repeats these mistakes on an even larger scale
By its own reckoning, ODOT doesn’t have enough money to fix current roads or keep bridges from falling down. The authors of HB 2025—Representative Susan McLain and Senator Chris Gorsek—are pushing the agency line that we have to “follow through” on our commitments to mega-projects and also add even more.
Nominally, HB 2025 purports to do that–and more–by creating an “Anchor Project” fund that promises to build five “mega-projects”: the Rose Quarter and Abernathy Bridge, as well as widening I-205 to Stafford Road, rebuilding the Center Street Bridge in Salem and the Newberg-Dundee Bypass. Together, based on current ODOT estimates, these projects will cost a total of more than $5 billion, of which perhaps $3.5 to $4.0 billion is unfunded. The trouble is, the $125 million allocated annually to the Anchor Project Fund is barely enough to pay for half of the cost of these projects (between $1.6 and $1.9 billion, if bonds are sold at 4-5 percent for 25 years).
As a practical matter, that’s probably just enough to get each of these projects started, but not nearly enough to get them built–especially if ODOT continues its trend on chronic cost-overruns. What that means is that ODOT will likely find itself in exactly the same budget mess it was after HB 2017 passed eight years ago: claiming that it has a legislative mandate to finish the projects, and using that as an excuse to shortchange maintenance and operations, and insisting that the Legislature needs to provide even more money if it wants the potholes filled, roads repaved and bridges standing.
And if that weren’t bad enough, there’s another elephant in the hearing room, as we’ve pointed out: More big cost overruns are virtually certain for the Interstate Bridge Project. ODOT has acknowledged the price is going up, and promised new estimates for the past 18 months, but repeatedly missed its own deadlines to release the new estimates, which are likely to top $9 billion. ODOT now says only that a new estimate on the bridge project is expected “by the end of the year,” conveniently after the Legislature has gone home. And HB 2025 provides literally nothing for this project to pay for these cost overruns and likely shortfalls in hoped for federal funding.
Still no accountability, cosmetic changes and conflicted consultants
The transportation committee co-chairs and ODOT officials are claiming that they’re addressing ODOT’s “accountability” problem in HB 2025, but in reality there are no substantive changes, only cosmetics. For example, the bill purports to improve accountability by having the Governor hire and fire the head of ODOT--but this exactly reverses the change the 2017 Legislature made, ostensibly to improve accountability. Other steps—creating a dashboard to track project costs, periodically auditing the agency, having a special oversight committee—have already been tried, and have proven to be utterly ineffective in either predicting or managing project costs.
ODOT and the Legislature have both hired consultants to look at the accountability issue, but in both cases the consultants are conflicted, more perpetrators and beneficiaries of cost overruns, not disinterested professionals looking to cut costs. The two firms, WSP and Atkins-Realis are, respectively, the largest contractor on the Interstate Bridge Replacement, and the second largest contractor on the I-5 Rose Quarter project–both projects with massive cost overruns. (Atkins-Realis just spent $300 million to buy David Evans and Associates which is working on the Rose Quarter, and also amassed a record of critical audits on the failed Columbia River Crossing project, where it was the largest ODOT contractor). ODOT and the legislature are seeking—and actually paying for—advice from companies that make bigger profits when projects go over budget, hardly the people to want to exercise any fiscal discipline.
Far from being a solution to ODOT’s financial woes, HB 2025 takes each one of these underlying problems and repeats it and makes it worse. It commits to billions more in mega-project costs. It provides less revenue than is needed to finish the projects. It provides no concrete recommendations for right-sizing projects or lowering their costs. It makes no serious changes to ODOT management. It rewards the very contractors who have benefited from cost overruns.
