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...
