By Alan Sipress
Washington Post Staff Writer
Wednesday, May 12, 1999; Page B1

Federal transportation officials are within weeks of presenting a financial package to overcome the nearly $1 billion shortfall in funding that has been the most daunting obstacle to building a new Woodrow Wilson Bridge.

After a year of tough bargaining, efforts to find a solution have gained momentum in the last month, and the U.S. Department of Transportation is getting ready to propose a $900 million bond package requiring Maryland and Virginia each to repay about $25 million a year in principal over 20 years, federal and state officials said.

Although the source of those funds has not been designated, officials said they expect the states would tap their future allocations of federal highway grants rather than raise money through other methods, such as tolls.

The state share is far larger than what officials in Annapolis and Richmond had hoped and is sure to face some resistance when the package is formally presented to them. But the plan would slice at least $400 million off the cost to the states had they sought conventional financing, because the federal government would now in effect cover the interest payments by providing tax credits to the buyers of the bonds in place of cash interest.

"It will be the answer to our prayers. It would overcome what I always considered to be the largest hurdle: identifying full funding," said Rep. James P. Moran Jr. (D-Va.). "If the states don't take this, they're nuts."

Questions over the yawning gap in funding have been overshadowed in the last month by a federal court decision ordering a halt to construction until more environmental review is completed. That ruling by U.S. District Judge Stanley Sporkin, which came in response to a suit by Alexandria activists opposed to a new 12-lane span, has ironically advanced the project by providing an impetus to break the funding deadlock.

The judge found that the Federal Highway Administration had failed to comply with four laws, including the Clean Air Act. Under that law, the Washington region must demonstrate that it has a credible source of funding for a new bridge before it can be inserted into the area's overall transportation plan.

"If there's any good that has come out of the lawsuit and the judge's decision, it is the momentum that has given to completing the financial package," Maryland Transportation Secretary John D. Porcari said.

The Clinton administration and Congress already have pledged to cover about half the estimated $1.8 billion expense of replacing the rapidly deteriorating bridge, which carries Interstate 95 across the Potomac River. Last year, $900 million for the new crossing was included in the multibillion-dollar transportation bill.

Congress also previously authorized the establishment of a regional authority that would take ownership of the new Wilson Bridge and could issue the bonds to pay for its construction. Both state legislatures have approved such a body.

Although the endorsement of a $900 million bond package by federal officials would dispel much of the uncertainty over the bridge's future, they remained reluctant to discuss the plan publicly until it becomes final. But Jack Basso, assistant transportation secretary for budget and programs, told area members of Congress that he was "encouraged" by discussions inside the administration.

In recent weeks, the Office of Management and Budget has shown a new willingness to accept the plan -- potentially removing a longtime obstacle -- but both that agency and the Treasury Department have yet to assent to all the specifics, officials said. Their approval could come as early as the end of the month.

The arrangement, which then would require congressional approval, also might entail action by the state legislatures to allow Maryland and Virginia to take on the long-term obligation of repaying the bonds. Virginia Transportation Secretary Shirley Ybarra said the state attorney general would have to examine the issue. She said the state also would have to consider whether new legislation is needed to empower a regional authority to issue bonds. Both Ybarra and Porcari said their states are waiting to see the details of the bond proposal before signing off on it. "That's been one of the things talked about," Ybarra said. "We're waiting for them to get back to us."

Although state officials have insisted repeatedly that it is not their responsibility to replace the federally owned bridge, in private they have proved less hostile to the arrangement being crafted.

Statements from Annapolis and Richmond -- such as the warning two months ago by Maryland Gov. Parris N. Glendening (D) that the two states could not contribute more than $170 million each -- have been characterized by federal officials as part of the bargaining process. Officials in both the administration and Congress said their state counterparts know that most of the project's cost is not to pay specifically for a new bridge but for the reconstruction of highways and interchanges flanking the span.

Financial questions have dogged the bridge project even as engineering and design work has begun. Transportation officials have been racing to erect the new Potomac River crossing by 2004, when heavy trucks could be banned from the existing bridge because of safety concerns.

Although state engineers said the 2004 deadline is not a "drop-dead" date, they said the life of the span could not be extended much beyond then unless a major investment is made in reconstruction on top of the short-term repairs already done.

The prospect of a truck ban has not been enough to galvanize federal and state officials behind a financial plan. It took Sporkin's unexpected decision to focus their minds on the funding issue.

Lawyers at the Department of Justice are still weighing whether to appeal Sporkin's ruling, but officials said it is unlikely the federal government would try to overturn the entire decision, because that strategy could entail long delays and might not succeed.

More likely, government lawyers will appeal a few elements of the ruling while seeking a clarification from Sporkin on two points: whether his decision requires a full, two-year environmental review or only a shorter study, and whether engineering work and property acquisition can proceed at the same time that the new analysis is being performed.