Transferring ownership: Some states look to reduce their roadway inventory

By Mary Ebeling
For state DOTs these days, revenues are hard to find. Agencies looking for ways to decrease spending for the short and long term are giving serious consideration to transferring ownership of state-owned roads to the local governments through which these roads run. At the same time that many states are losing their appetite for maintaining large highway systems, some cities are developing a renewed interest in local control of roadways, creating an opportunity for cities to physically transform these corridors with flexible designs. As financially strapped states consider transferring ownership of urban roadways to host cities, mechanisms for executing these transfers, cost sharing agreements, and financial plans must be worked out.
The details of how such transfers occur, including any cost sharing for the roadway, will differ by state. Since few of these transfers have occurred so far, the various models for financing of repairs and ongoing maintenance is still being negotiated. States may opt for a one-time payment meant to fund bringing a roadway to a state of good repair; others may agree to cost sharing based on a portion of the funds previously directed to the maintenance of the transferred road. Cities will likely discover that the cost share and local taxing authority alone don’t provide sufficient revenues for large reconstruction projects, so might consider P3s, municipal bonds, or other long-term credit options to fill the gap.
An example from South Carolina illustrates some of the challenges associated with jurisdictional transfers. Beaufort, SC, would like to narrow some of their roads and allow parking to slow down traffic, but the state owns most of the roads in South Carolina. But the city felt a proposal by SCDOT to transfer ownership of state roads to the city was problematic due to lack of a cost-sharing offer from the state. Although this transfer would help Beaufort pursue its livability goals, no cost share was initially offered, and the transfer is in limbo.
The case of Lehi, Utah, illustrates a successful transfer of ownership of a roadway. The transfer was appealing to a state cutting back on expenditures and to a city that desired to control a roadway in order to better meet economic development and livability goals. The jurisdictional transfer resulted in a reconstruction of the former state-owned roadway, State Route 73, which is also Lehi’s Main Street. UDOT committed $5.7 million for the reconstruction and rehabilitation of the roadway through the city, and Lehi was able to take ownership of this street. With this agreement, Lehi City was able to move forward to completely reconstruct Main Street in a way compatible with the livability and safety goals it had sought for years.
Cities show a growing awareness of the constraints “stroads,”—street/road hybrids that do not seem to serve any mode well—can put on local community goals. This awareness, when paired with a state DOT’s willingness to relinquish ownership of a roadway, can benefit both the state and the local community. However, before most cities would be willing or able to accept responsibility for a piece of infrastructure as significant as a roadway, state DOTs and city officials will need to develop flexible funding models that give a city assurance they will be able to manage these assets into the future.
Mary Ebeling is a Transportation Policy Analyst at SSTI.