Schneweis, 020619 NEAGO, AGO 19-1

Docket Nº:AGO 19-1
Case Date:February 06, 2019
Kyle Schneweis, P.E., Director
AGO 19-1
No. 19-001
Nebraska Attorney General Opinion
State of Nebraska Office of the Attorney General
February 6, 2019
         SUBJECT: Constitutionality of Proposed Financing Plan for State Highway Construction Project.          REQUESTED BY: Kyle Schneweis, P.E., Director, Nebraska Department of Transportation          WRITTEN BY: Douglas J. Peterson, Attorney General, Martel J. Bundy, Assistant Attorney General          BACKGROUND          You have requested our opinion concerning the ability of the Nebraska Department of Transportation ("NDOT") to use an innovative approach to finance the construction of the Lincoln South Beltway. That project will consist of eight and one-half miles of new four-lane freeway connecting U.S. Highway 77 to Highway 2 thereby creating a bypass south of Lincoln. The project includes five interchanges. NDOT expects to commence construction in early 2020. The anticipated cost is about $300 million, making it the most expensive highway project ever undertaken by NDOT.          The project can be built in three years. NDOT's cash flow, however, is not sufficient to pay for the entire cost of the project over that period. NDOT's typical approach would be to break the project into smaller parts and build each part as NDOT's cash flow permits. Under that approach, the bypass would take seven to ten years to complete. The smaller parts would be completed at various times but. would serve little or no purpose until the entire bypass was completed. The public would have a usable bypass sometime between 2028 and 2030.          NDOT proposes a construction contract that requires completion in three years, but pays the contractor in scheduled payments over a period of seven to ten years. Under that plan, taxpayers would realize the benefits of the new highway as eariy as 2023, Payments would be made during construction and would continue for about four to seven years after completion. (That is the same payment schedule that would exist if the project were built in smaller parts.) NDOT anticipates a cost savings due to scale if the work is done as one project. Doing the work as one project would also avoid five years of inflation in construction costs.          NDOT plans to pay for the project in part with funds generated under the Build Nebraska Act (Neb. Rev. Stat. §§ 39-2701 to 39-2705 (2016 and Cum. Supp. 2018)), which was passed with the intention of building capital improvement projects such as the Lincoln South Beltway. Additional funding would come from gas tax revenue, which is statutorily dedicated to funding highway construction projects. Neb. Rev. Stat. § 66-4, 147 (2018).          Within that context you ask the following question:
Is NDOT allowed, under the Nebraska Constitution, to accelerate construction of a much needed project while making scheduled payment to the construction contractor over an extended time period when the construction contract requires each scheduled payment to be made only upon an express "appropriation" being made by the Legislature?
         ANALYSIS          The Director of the NDOT has broad authority to enter into construction contracts. Neb. Rev. Stat. § 81-701.01 (Cum. Supp. 2018) gives the Director full control of the management, supervision, administration and direction of the Department. Neb. Rev. Stat. § 81-701.02 (Cum. Supp. 2018) grants the Director power to sign and execute all documents and papers, including contracts and agreements for highway construction, State government has authority to enter into contractual agreements as necessary to conduct state business on behalf of the people, and that authority extends to entering into contracts subject only to those limitations or restrictions constitutionally imposed. Op. Att'y Gen. No. 02014 at 3 (April 23, 2002).          There are no statutory limits on the duration of NDOT construction contracts. The statutes do not address whether payments can be made over a time period longer than that required to do the work. Neb. Rev. Stat. § 39-1365 (2016) declares "the highways of the state...

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