Transportation advocates have all but placed bets on the nation moving toward a mileage tax to replace the current revenue source, gasoline and diesel fuel taxes and vehicle-related fees. But White House officials have stated emphatically that they will not consider a new transportation tax in a struggling economy.

The delay in finding a new revenue source could spark more participation from the private sector and more public-private partnerships. If Congress does not raise fuel taxes significantly, states and localities will look more and more to the private sector for capital to support their needs, said Jack G. Finn, senior vice president and national director of toll services of HNTB Corp. But commenting on prospects for a gas tax increase, Finn said, “I think that’s doubtful.”

One potential mechanism to pay for infrastructure is a national infrastructure bank, which has been proposed by congressional lawmakers and the White House, among others. However, the current multi-year transportation proposal does not yet include such a bank, and Congress voted not to appropriate any money for it this fiscal year, opting instead for the bank to be created under the authorization process. Additionally, transportation experts have warned that a bank would not be a cure-all for funding woes.

“An infrastructure bank is not a substitute for money,” said Joshua Schank, director of research for the Bipartisan Policy Center’s National Transportation Policy Project, which is pushing for a performance-based federal policy and wants tolling — particularly congestion pricing — to play a larger role in transportation finance.v

Editor’s Note: Bond Buyer is a SourceMedia publication. SourceMedia is owned by Investcorp, which also owns Randall-Reilly, the parent company of Better Roads.

www.bondbuyer.com

Good Expectations

— by Daryl Delano, Contributing Editor

As 2009 drew to a close things were finally looking up for the U.S. economy. The final economic indicator report released last year was from The Conference Board, and it showed the Consumer Confidence Index (CCI) rising for the second month in a row during December.

The overall CCI reached its highest level in three months – but thanks entirely to a sharp upturn in the “Expectations” component. And therein lies the source of some concern as we enter the New Year.

The “Present Situation” component of the CCI actually declined by more than 10 percent between November and December, and remained at its lowest level since February of 1983. Thus, although consumers were concerned at the end of 2009 about persistently high levels of unemployment and low/no growth in household income, they expected economic conditions to improve between then and the middle of 2010 (the “Expectations” component of the CCI measures consumer’s assessment of economic conditions 6 months in the future).

Consequently, economic developments in the real (vs. “expected”) economy during the first few months of this year will be critical in establishing momentum for economic growth – or for fueling concerns about a “double-dip” recession. At year’s end, of course, we didn’t yet have a reading on how economic growth (as measured by the change in Gross Domestic product [GDP]) had fared during the final quarter of 2009. Most indicators were positive, however, including consumer confidence, manufacturers’ new orders, and initial reports of retail sales during the Christmas-Hanukah-New Year’s Holiday period. We did, though, have final numbers for the third quarter of the year. Third-quarter 2009 GDP grew at an annual rate of 2.2 percent – the first positive move for GDP since the second quarter of 2008. Nevertheless, last year’s third-quarter gain in GDP was much lower than the 3.5 percent increase initially estimated by the U.S. Commerce Department — a worrisome development were this to become a pattern of economic reality falling short of expectations.

Expectations for the final quarter of last year were high – GDP growth should have been as good (or better) than that recorded during the third quarter of the year.

More important, however, will be the U.S. economy’s growth during the first three months of 2010. How strong – and how sustainable – will economic growth prove to be as we move through the New Year? Construction-wise there are plenty of positives – the bounce-back from depressed levels for the new residential and residential remodeling sectors of the market, and the ARRA-stimulus-funding-fueled momentum for highways, bridges, and most other sectors of infrastructure construction. But there are significant negatives, as well – cash-strapped state and local government funding authorities, on top of demand-challenged and funding-starved private developers of retail, office, hotel and warehouse space.

The Great Recession of 2007-2009 has fundamentally changed the economic landscape and has at least temporarily altered the behavior of U.S. consumers and businesses. The impact of these behavioral changes on spending and investment decisions – and thus on overall economic growth – will become clearer as we move through 2010. At present, most economists are cautiously optimistic that the “tailwinds” of monetary and fiscal policy stimulus, improved financial conditions and pent-up demand will be enough to offset the continued “headwinds” of unemployment, foreclosures and limited credit availability. If so, the nascent economic recovery – while slow to develop strength and momentum – should prove to be sustainable, and should become self-reinforcing as we move into 2011.v