A flurry of legislative activity in the House of Representatives and Senate on measures affecting transportation infrastructure projects may signal movement on a multi-year spending in the 112th Congress. The need is clearly there: the American Society of Civil Engineers (“ASCE”) in its 2009 “Report Card for America’s Infrastructure“, 33% of America’s major roads were listed as being in poor or mediocre condition and 36% of the nation’s major urban highways were congested. The ASCE gave our roads and bridges a grade of “D-“. Our transit systems face a similar situation and only got a slightly better grade of “D”. As any commuter will tell you, this situation has not improved.
The question is, how does the federal government pay to 1) maintain and 2) improve the nation’s road and rail infrastructure with decreasing gas revenues flowing into the Highway Trust Fund (which is the main mechanism on the federal level to pay for such projects)? The answer may lie with fewer direct outlays of federal funds for transportation –compared to prior years– and an increased reliance instead on the leveraging of funds, through the greater use of existing federal financing programs, the creation and capitalization of state “infrastructure banks” to provide financing for projects, and policies that will attract private sector investment i.e. through public-private partnerships. That’s the emphasis in a transportation funding proposal released this week by the House Transportation and Infrastructure (“T&I”) Committee Chair, John L. Mica (R-FL-7). The Public Policy and Infrastructure Practice takes a look at what is being proposed and how likely any measure will be enacted into law, given the nation’s fiscal situation.
Leveraging is a key component in the SAFETEA-LU reauthorization proposals from the House Transportation and Infrastructure Committee.
At issue is the re-authorization of the multi-year transportation law known as “SAFETEA-LU” which provides funds for road and rail programs and projects. The law should have been re-authorized before its September 30, 2009 expiration, however, decreasing revenues into the Highway Trust Fund, which is funded primarily by the tax on motor fuels, has resulted in an impasse on any decision for new law. Instead the existing law has been subject to a series of temporary extensions, the latest expiring on September 30th of this year. A sign that this could change occurred this week when House T&I Chairman Mica introduced a six year, $230 billion SAFETEA-LU re-authorization proposal. This is over $50 billion less than the $286.5 billion included in SAFETEA-LU when it was signed into law in 2005. (Public Law-109-59) In a recent press conference and PowerPoint presentation, Chairman Mica detailed three tools to help stretch this lower dollar figure further: 1) He authorizes $6 billion to fund the Transportation Infrastructure Finance and Innovation Act (“TIFEA”) program. TIFEA provides low interest loans, loan guarantees and lines of credit “to finance surface transportation projects of national and regional significance”. According to the Chairman, this would fund at least $120 billion in transportation projects. 2) Chairman Mica would authorize and capitalize “State Infrastructure Banks” to provide loans and loan guarantees for state and local transportation projects. States would be able to dedicate 15% of the formula funds received under SAFETEA-LU to help do this. 3) Chairman Mica would encourage private sector investment in transportation. He would do so by increasing the use of financing programs, such as TIFEA, which fund projects with private-sector funding. He would also encourage public-private partnerships for transportation projects by providing greater credit towards a “local share” of a project’s cost to those that utilize such partnerships. In addition, he would remove barriers that he says prevents the private sector from offering public transportation services.
We note that Congressman Mica’s Senate counterpart, Senate Environment and Public Works Chair Barbara Boxer (D-CA) proposed her own version of a SAFETEA-LU re-authorization bill and has criticized Congressman Mica’s bill as inadequate for the nation’s transportation needs. Her bill would provide a greater amount of annual funding but over less time ($109 billion over two years). Whether both the House and Senate can agree upon a figure will depend on whether the pent-up demand by state and local governments and the business community for a steady stream of transportation funds will overcome any concerns about the cost to the federal purse. However, it is probable if not definite that any measure that reaches the President’s desk will include a financing mechanism for transportation projects