For everyone from truckers to railroads to port operators who wondered when Washington might finally decide to craft new long-term surface transportation legislation, President Obama and the new Congress have a unified message: Game on.
By saying in his State of the Union message he wants to “redouble” efforts to improve the nation’s infrastructure, Obama made clear this will be a centerpiece of his 2011 agenda. Meanwhile, committees in the Republican House and Democratic Senate have started taking steps toward shaping their own plans, and set a tentative schedule that could produce legislation in both chambers by summer.
Now the key questions are when solid proposals might emerge and, more importantly, what new transportation priorities will look like.
Some answers will come starting next week, when the president offers his fiscal 2012 budget plan. Soon after, more detailed proposals should come from the Department of Transportation.
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Congress and the administration will be forced to wrestle over a basic issue — determining what is a justified government investment that would lift the economy, and how much would amount to another round of stimulus-type spending many are dead-set to oppose. The first view has the potential to win the hearts and minds of enough lawmakers to pass a new multiyear bill, but the second view could be a deal-breaker.
Insiders among industry trade groups have plenty of ideas on what a transportation policy should include. They hope for a centrist deal between Obama, his Democratic allies in the Senate and a Republican House that is bent on slicing overall federal spending.
“There is perhaps more of an opportunity with divided government” for a transport spending plan “than when one party takes all the credit or blame,” said Greg Cohen, president and CEO of the American Highway Users Alliance.
While freight interests want Washington to put as much muscle as possible into a new surface transportation bill, the list of specific projects vying for federal aid has surged.
And in an era when the DOT’s grants are sort of replacing targeted funding from congressional earmarks, but some budget-cutters want to rein in those grants, freight interests wonder how they may get more federal money.
The list of projects includes untangling freight rail and commuter lines that make Chicago not just the continent’s biggest rail hub but also its most congested. That would push more funding to the CREATE program that includes a wide range of improvements around the city.
Topping past DOT grants were Norfolk Southern Railway’s Crescent Corridor intermodal plan and CSX Transportation’s National Gateway, projects that will be years in development and can take large volumes of freight that would otherwise move on roads.
Federal money has just started to flow toward marine highway projects on both ocean coasts and across the Gulf of Mexico that can haul containers instead of moving them on the surface, and ports have lined up for mixed-use grants such as the Alameda Corridor-East rail project that helps Los Angeles-Long Beach container traffic.
Without a robust grants program, whether in an infrastructure bank or continuing as in the past two years, and with Congress eschewing earmarks for now, freight interests might find they have to raise the money elsewhere or turn to federal loan programs.
An effort to pump up transportation spending would also revive lists such as the “Critical Commerce Corridors” lineup of freight-focused programs, which the American Road and Transport Builders Association produced after previous transportation legislation mostly ignored intermodal connectors.
And a new plan must take into account the administration’s zeal for what it calls high-speed rail, which could face significant political hurdles.
Although the president also called for a five-year freeze on total domestic spending and tied spending ideas to U.S. efficiency moving goods in world markets, some critics say the president’s use of “investment” for infrastructure is simple code for “more spending.”
Rep. John Mica, R-Fla., chairman of the Transportation and Infrastructure Committee, is looking for some middle ground. “It is encouraging (the president is) now on board with getting infrastructure projects and jobs moving again,” he said. “However, just another proposal to spend more of the taxpayers’ money, when we have billions of dollars sitting idle tied up in government red tape, will never get our economic car out of the ditch. We’ve got to do more with less to improve our infrastructure in a fiscally responsible manner.”
Although infrastructure spending faces opposition, business groups are lining up behind it along with labor and transportation industries — a combination that could shift votes in the months ahead.
In an extraordinary joint statement, U.S. Chamber of Commerce President and CEO Thomas J. Donohue and AFL-CIO President Richard Trumka said business and labor “stand united in applauding President Obama’s call” to boost the economy and create jobs with infrastructure investment.
“Whether it is building roads, bridges, high-speed broadband, energy systems and schools, these projects not only create jobs and demand for businesses, they are an investment in building the modern infrastructure our country needs to compete in a global economy,” they said.
Agreement on the details might be harder to come by, since House Republicans so far want to limit transport spending to current levels or below. And it is not clear how many transport programs can be pulled into a single piece of legislation.
Outside of surface transportation, industry wants Congress to finally pass an aviation bill that puts the Federal Aviation Administration on a clear multiyear funding path. Ports want the feds to use the $5.6 billion cash buildup from the harbor maintenance tax to help dredge channels to be ready for bigger ships when an enlarged Panama Canal opens.
The traditional multiyear transportation bill is about road, bridge and transit programs under the Highway Trust Fund. But through the 2009 stimulus and subsequent discretionary grants outside that fund, the administration broadened the DOT’s reach.
Now in the mix is intercity passenger rail, where most of the projects put public funds into upgrades of freight rail corridors to handle more or faster passenger trains.
The DOT’s discretionary grants for multimodal freight operations are popular, but they blur the lines of what used to comprise federal transport programs. More industries are also seeking funds to knit different freight modes together. The American Association of Port Authorities wants Congress to keep discretionary grants but lock in 25 percent for port projects. It also backs investments in freight rail and tax incentives to expand rails’ port connections.
But the Highway Trust Fund has a dedicated revenue stream mostly drawn from taxes on highway gasoline and diesel fuel use, while the grants for passenger and freight rail, ports and other projects have come from general revenue. The Obama team last year proposed combining revenue sources into a single transportation fund, but that would be a big change in concept, merging revenue and project streams that were separate up to now.
The president vowed his infrastructure push will be “fully paid for, attract private investment and pick projects based (on) what’s good for the economy, not politicians.” That signals a mix of public-private deal incentives that can draw conservative support, a continued DOT grants program and some new funding idea.
Until now, the president has stoutly opposed hiking per-gallon motor fuel taxes during a weak economy. Some House leaders, including Mica, also oppose fuel tax hikes. An earlier administration idea to tax oil companies to cover project spending is also likely to face stiff headwinds.
Policy specialists, though, think 2011 could bring important changes. Support is spreading for a shift from the per-gallon tax collection to a percentage fuel tax, which would allow trust fund receipts to grow as pump prices rise over time but without hiking the tax level itself.
So, what could a 2011 surface transportation bill look like?
Here are some ideas on basic programs:
It could replace the Highway Trust Fund with a Transportation Trust Fund. Renaming the fund accepts what is already happening, and lets the DOT and Congress better manage linked spending. But it would vastly complicate the funding stream and project mix, so Obama would have to add general revenue for grants or offer other income. Cohen said highway users would look for railroads or other users of such a fund to contribute revenue if they would benefit from trust fund spending, “and I don’t think that will happen.”
Indexing the federal levy for inflation could generate billions of extra dollars over time in federal receipts as gas prices rise. “Indexing it makes a lot of sense,” said former DOT Deputy Transportation Secretary Mortimer L. Downey, a senior adviser to Parsons Brinckerhoff.
Much bigger gains would come from hiking fuel taxes, something the AAPA, Chamber, AHUA, American Trucking Associations and other industry groups advocate. But few think they can they sell the idea to Congress and the public.
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It could include new tax breaks or other incentives to entice private capital firms to build more infrastructure. “There’s a ton of money there that could be used,” depending on the incentives, said Jack Basso, director of program finance and management at the American Association of State Highway and Transportation Officials. But investors would need a clear funding stream to repay them and guarantee desired returns, and other analysts say that could mean tolling more infrastructure.
One program many are pressing for is an infrastructure bank or fund. The administration previously proposed routing its various grants, loans and other project finance aid through such an entity. That could help it handle now-separated accounts, but gives more decision power to the DOT.
It’s also likely the administration will seek to consolidate programs. The DOT now has 108 different programs, many overlapping. But Downey said “there is certainly room” to cut programs, but savings “don’t add up to a miraculous amount.”
There could also be a change in the long-established formulas that allot money to states for their priorities to a new focus on high-value federal target areas based on performance measures. But that would trigger a big fight over states’ allocations, and over the DOT’s greater control of more spending decisions.
There also could be an overhaul of some projects. The stimulus rush showed many projects can be done in less time, for less money than in the past, easing the drain on the trust fund and out-year commitment levels. Finding ways to speed up projects permanently can alter the spending curve.
Some want a boost in the Federal Highway Administration’s low-cost lending under the Transportation Infrastructure Finance and Innovation Act. “TIFIA is a very good leveraging program” for projects, Basso said. The government pays a risk premium on each loan into a federal backup pool, but $500 million in budget costs can generate up to $5 billion in project finance.
Another change would reshape a Railroad Rehabilitation and Improvement Financing program that has $34 billion in unused loan authority. DOT officials want to make sure their loans do not face defaults, so pushing them to issue more in RRIF loans may take new legislative language.
There also may be savings in what is called orphan earmarks. Reports say billions of dollars in authorized money have gone unspent. Freeing that up in law could unblock some money, but it is unclear how much.
Contact John D. Boyd at email@example.com.