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ST. LOUIS — The Missouri Department of Transportation is threatening to claw back federal funding earmarked for local governments unless they can spend the money faster, a change in policy that has blindsided area transportation planners and could derail some regional road projects.

The threat has riled the East-West Gateway Council of Governments, which administers about $90 million annually in federal money that passes through MoDOT for local road projects on the Missouri side of the St. Louis metro area.

“(East-West Gateway) staff is extremely disappointed and displeased with this change in policy,� the council said in a memo to its board of directors last month, a departure from the dry language it normally uses to discuss regional infrastructure planning and federal and state grants.

Jim Wild, the council’s executive director, acknowledged a backlog among local government projects reliant on the federal grant money. But he said much of the issue stems from delays caused by the pandemic, such as staffing shortages and accessing the courts to acquire right-of-way. Plus, he said, rapid inflation drove up project budgets and forced local governments to find other local funding matches to make up the difference.

“I just don’t think it’s much of a partnership when you don’t communicate it and you just mandate it,� Wild said.

MoDOT’s concern is over unobligated federal transportation money that in 2022 reached $83 million awaiting use for local projects. That money is earmarked for specific local government projects, but local governments need to complete certain steps before the feds sign off on its use, such as engineering work, construction plans and right-of-way acquisition.

MoDOT has for several years raised concerns about the growing unobligated balance. But the council worked with the state transportation department and local governments to reduce it to $64 million last year.

As recently as November, MoDOT Director Patrick McKenna thanked regional transportation planning organizations such as the council and its counterparts in Kansas City and Springfield for their efforts to reduce the balances, according to a council memo.

Then, in January, McKenna changed the policy, setting a 120% spending goal for regional transportation groups and implementing a clawback if the regions obligate less than 110% of their annual allocation to local projects, according to the council. Anything under 110%, or $99 million for the St. Louis region, would be taken back by MoDOT and used for state road projects.

“It just kind of surprised everyone,� Wild said.

For MoDOT, it’s a matter of maximizing federal funding for the state. The backlogs at the local level can ding Missouri when it applies for federal funding and could potentially mean fewer federal dollars overall coming to Missouri. That could happen at the same time Missouri is ramping up a massive, $2.8 billion rebuild and lane expansion on Interstate 70 between St. Louis and Kansas City that it will need federal dollars to help with funding.

The backlogs are an issue across the country, and some state transportation departments are more flexible than others, Wild said. The Illinois Department of Transportation has worked with East-West Gateway and been more lenient given the issues faced by locals, Wild said.

“They’re more concerned about their program, and I get it, but I don’t agree with it,� Wild said of MoDOT. “We’re trying to look out for our municipalities and our counties and our region that are supposed to get the money.�

While the region scrambles to try and get projects back on track, more money is coming in through the federal grant programs because of increases in funding through the federal Infrastructure Investment and Jobs Act of 2021. The $90 million allocated to regional Missouri projects is up about $20 million because of the extra federal funding.

“We’re trying to spend 25% more money than what we were,� Wild said.

In a statement, McKenna, the MoDOT director, said the extra money from the infrastructure bill has made it harder for some local governments to meet funding deadlines. He said MoDOT has hosted workshops and its staff are trying to help local governments work through federal approvals more quickly.

“Together we are trying to find ways to streamline processes, including steps needed to reach federal requirements and deadlines,� McKenna said in the statement. “We want to help our local government partners maximize the federal transportation funds available to them and not lose funds if annual obligations aren’t met.�

But for local governments, even the loss of a few million dollars can blow a hole in the budget of a road project that has been in development for years.

St. Louis County gets about $20 million a year from East-West Gateway’s $90 million annual allocation and typically matches about 40% of that with local funds, said Joe Kulessa, acting deputy director of the county’s transportation and public works department.

There’s never enough money for all the needs St. Louis County has — “If you gave me a billion dollars, I could spend it,� Kulessa said — and all sorts of issues have slowed pre-construction work on county road projects. The county has tried to speed things up, hiring more outside consultants to complete the work faster. But even they are understaffed, he said.

“When MoDOT just says, from our perspective, overnight, ‘Yeah we know we’ve let you do this for years, but we’re not going to do it anymore,’ it’s that change management piece that came as a surprise,� Kulessa said. “And given the environment that we’re in puts us in an even worse place.�

Even with the change in policy, Wild said he expects the region to hit the 120% goal and is not at risk of losing any money this year by allocating less than $99 million. The East-West Gateway is telling local governments in the region to move up any projects they have and not ask for any extensions in order to reduce the backlog. But an unexpected problem can always come up and cause a delay, Wild said.

“I think we’re in a good place,� he said. “It’s just when they don’t communicate these changes and they just drop them on us after the fact, or arbitrarily, it really makes it tough for us to get our job done or get the project done.�