Historical Inflation Rates

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					                       Transportation Program Committee (TPC)
                                   Meeting Minutes
                                  December 15, 2006

Attendees:    Bob Winter (chairing for retired Deputy Doug Differt), Abby McKenzie, Rick
              Arnebeck, Bob Hofstad, Tim Henkel, Sue Thompson, Duane Leurquin, Kevin
              Gray, Keith Shannon, Dave Janisch, Peggy Reichert, Khani Sahebjam, Dan
              Dorgan, Donna Allan, Ed Idzorek, Scott Peterson, Bob McFarlin, Betsy Parker,
              Julie Skallman, Rabinder Bains, Lucy Kender

Status of FFY 2007 Federal Funds1
Recently it had been reported that Congress may pass a continuing resolution for the entire FFY
2007 instead of approving a 2007 Transportation Appropriations bill. The current continuing
resolution has been extended to February 15, 2007. Duane Leurquin addressed the potential
impact a continuing resolution would have on Minnesota’s construction program. Preliminary
estimate is that this would result in a decrease of $39M in federal funds. Currently $70.4M of
federal funds remain for FY 2007 lettings, with $41M in the Metro District. Each month that
passes will reduce the flexibility by 30% in selecting projects to defer.

Action: Maintain current ’07 program at this time and continue work to prepare Crosstown for
March 2007 letting until more information is forthcoming.

STIP Funding Guidance2
Bob Hofstad described the federal funds distributed by target formula for the current STIP and
presented a recommended level for the FY 2008-2011 STIP. In FY 2007 & 2008 this was
$330M and with the implementation of the new Target Formula in 2009 this amount increases to
$392M. The BAP reductions and redistributions continue through 2017. Beginning in 2011 all
of the reductions will be redistributed.

Projects have been slated for the Statewide Bridge Preservation Fund and Statewide Corridor
Fund but the funding is not committed (except $11 M for TH 101 BAP) until the Federal projects
are authorized and awarded. August Redistribution is not reflected in the forecast. A
recommended funding level for state funds was also presented.

The November Forecast for State Funds is down from the February Forecast. The State Fund
base distributed by Target is $290M before Flex Fund additions. Fuel tax and tab fees are
forecast to be down the most over the next four years. The HUTDF portion of MVST is
currently at 32% for FY 2008. Mn/DOT’s share of this is forecasted to be down each of the next
four years. Also $15M is being shifted from construction to operations. With the decline in
revenues, the shift to operating and our draft Fund Balance Policy, the program will need to be
adjusted. These adjustments will require FY 2008 funding be reduced from $303M to $266M
and FY 2009 from $305M to $290M. Options for FYs 2010 and 2011 were to hold the targets at
$275M plus flex funds or maintain the $290M level plus flex funds. Dave Janisch stated the new
forecast will impact the time required to meet preservation targets.
Action: TPC agreed to hold the federal forecast as is for now. Recommendations for state fund
guidance were forwarded to the Commissioner who approved the reductions in 2008 and 2009
with restoration to the $290M level in 2010 and 2011.

Inflation Forecast3
Rabinder Bains presented historical inflation rates from SFY 2001 through 2006 and
recommended inflation factor to use in preparation of FY ’08-11 STIP. Historical rates averaged
3.9% from 2002-2005 while our forecast averaged 5.0%. The unprecedented 20.7% rate of SFY
2006 is not expected to continue; rather a more modest rate of 7% from SFY 2007 through 2009
is forecasted. Reasons for this include increases in asphalt due to the short-term high oil prices,
world demand for construction materials, current trend of consolidation in the construction
industry which may reduce competition, and lack of trucking capacity are some reasons for this

Action: TPC approved the use of 7% inflation for SFY 2007-09 with 5% for 2010 and beyond.

SCF Guidance 20114
Ed Idzorek addressed the comments received from the districts regarding the use of the 2011
SCF for pavement preservation. Four recommendations to the Funding Application process were

Action: The preservation solicitation for the 2011 SCF was approved with minor revisions to the

Transportation Revolving Loan Fund Solicitation
Sue Thompson advised that the Highway – Non Restricted Account will allow for a solicitation
of approximately $7.0M (unleveraged). Projects are required to be in compliance with Federal
Title 23 but do not need to meet the Federal Development requirements since these are not
considered first generation funds. Projects will need to be ready to start using loan proceeds by
the end of calendar year 2008.

Action: TPC approved the advancement of the TRLF solicitation.

          Federal Obligation Authority Potential Impact of Year Long Continuing Resolution; Metro District 2007
Projects Not Let
          STIP Guidance SFY 2008-2011(2 charts); STIP Funding Guidance (SRC)
          Summary of Inflation Rate Forecast for the STIP (3 tables and 1 chart)
          Feedback on the Draft Guidance for the proposed FY 2011 Statewide Corridor Fund for Pavement

Description: This is an example of historical inflation rates. This document is useful for conducting historical inflation rates.
Mary Jean Menintigar Mary Jean Menintigar