The surface transportation bill Congress squeezed out in late June appears to be more a deferral of hard decisions than a strategy to fix the nation’s crumbling infrastructure.
Granted, the bill, signed into law by President Obama on July 6, will maintain highway spending through the end of September 2014, giving state and local transportation agencies slightly more certainty in long-term project planning. And the bill likely will cut the average highway construction time to about seven years through the streamlining of environmental reviews.
But the bill, which ends three years of funding uncertainty that came with nine short-term extensions since the previous law — SAFETEA-LU — expired in September 2009, ducks the issue of finding a revenue source to fund the maintenance and expansion of U.S. infrastructure. Instead, the $104 billion bill plugs the gap in revenue from the Highway Trust Fund with about $19 billion from the general fund and numerous “offsets” and “pay-fors.”
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The latter bag of budget gimmicks, some of which span 10 years, includes a transfer from the Leaking Underground Storage Tank Trust Fund, and the tweaking of pension rules so the government will have more taxable income to tap.
Few of these budgeting tricks will have a direct impact on freight transportation providers — except, that is for the roughly $108 million less funding U.S.-flag vessels will get to ship foreign food aid, according to reports. Finding such ways to avoid raising the fuel tax or creating another revenue stream, such as charging drivers per miles traveled, will be far harder next time around.
The bill “bought us 27 months to find a new source of revenue,” said Janet Kavinoky, executive director for transportation and infrastructure at the U.S. Chamber of Commerce. “We have done more education on the need for user-based revenue. I think members of Congress are getting it.”
She admits, however, that the only time the federal fuel tax has been raised was not through transportation legislation but as part of a broader deficit-reduction effort in 1993. The Highway Trust Fund, the recipient of the 18.4-cents-per-gallon gasoline tax, risks bankruptcy shortly after the transport bill expires in late 2014. Negotiations on how to cut $1.2 trillion from the deficit in order to avoid a painful sequestration is one outlet for a hike in the fuel tax, as are talks regarding the soon-to-expire Bush tax cuts.
In terms of helping to provide shippers with more effective infrastructure, the transportation bill takes an important step by calling on the Department of Transportation to create a national freight transportation plan. But the bill doesn’t provide the $4 billion sought to improve the designated network of 27,000 miles of highways and roads. Still, it’s the first move toward a long-delayed freight policy.
“This compromise legislation shows that Congress has been listening when we’ve made our case for supporting the systems that move our nation’s goods,” said Mortimer Downey, a former DOT deputy secretary and now chairman of the Coalition for America’s Gateways and Trade Corridors. “We see this as a good platform upon which future steps can be taken to further improve this critical network and its infrastructure.”
One highlight for the freight industry is that a $500 million-a-year grant program aimed at funding larger projects with regional and national importance is on track. State transportation agencies also can beef up their freight systems by getting up to 95 percent federal reimbursement for projects that fit into their freight plans and the DOT’s national network.
The bill also looks to attract more private investment through increased lending capabilities in the Transportation Infrastructure Financing and Innovation Act, or TIFIA. Federal credit assistance for private projects will rise from $122 million annually to $750 million in the first year, and to $1 billion in the second year of the bill. In addition to rural projects getting better lending terms, financing through the TIFIA program will increase from 33 percent to 49 percent. Critics, however, contend stripping project selection criteria, such as economic and environmental impact, weakens the program, leaving the private entity’s creditworthiness the only hurdle to gain federal help.
To offset insufficient federal funding to maintain and improve state infrastructure, the bill gives states more leeway in charging fees on toll roads and partnering with companies to privatize highways. Through the bill, states will be able to use federal funding to maintain and build tolled highways, bridges and tunnels.
Public-private partnership advocates also scored a victory through the removal of an amendment that would cut federal highway funding to states that sold or leased toll roads to private companies. Another amendment, which would have tweaked the tax code to make such projects less attractive to private investors, didn’t make the final cut.
For legislation caught in the wind tunnel of reduced spending and political posturing, just making it onto Obama’s desk ahead of the November elections is a feat. Shippers and transportation providers, however, will likely be less enamored as the U.S. infrastructure worsens and the prospects of a true fix hinges on Congress doing better in two years.