Today the search goes on for new funding options
John Latta | April 14, 2010
The Transportation and Infrastructure Subcommittee on Highways and Transit today heard testimony on innovative ways to stretch public transportation investments through the use of innovative financing methods.
Jim Oberstar (Minn.), Chairman of the full Committee on Transportation and Infrastructure, and Subcommittee Chairman Peter DeFazio (Ore.) addressed the opening session. So did. John Duncan, Jr. (R-TN), Highways and Transit Subcommittee Ranking Member
Basically they laid out the simple, but deep, jam we are in. Highway funding needs more money. Existing ways of raising it are inadequate. Let’s talk about innovative ways to find more. I’ve pasted in their comments here. I didn’t see any solutions here, but you can feel the urgency in their voices, you can hear them saying, “No, really, if we don’t find a new course we’re going to hit that iceberg.” The question raised here, big time, is can the meeting find anything new that could actually work and if they do will something be done or will we just talk about it.
Statement of James l. Oberstar
This nation is suffering from significant underinvestment in its surface transportation infrastructure, which has undermined both the condition and performance of the network. We must renew our commitment to make the investments required to rebuild and expand the nation’s transportation infrastructure. If we fail, congestion will worsen, goods will move more slowly, people will spend more frustrating hours idling in traffic, air quality will continue to deteriorate, and quality of life will diminish.
To address these needs, we have developed the six-year, $450 billion Surface Transportation Authorization Act. This transformational long-term authorization makes the programmatic reforms necessary to support surface transportation needs into the 21st century. The obstacle to moving forward with this important legislation is how to pay for it. Fully funding the $450 billion, six-year investment level called for in the Surface Transportation Authorization Act requires $140 billion in additional revenues over six years above what can be currently supported.
$65.5 billion a year to maintain the current year’s surface transportation investment level, and
$75 billion over six years to finance the additional investment called for in the Surface Transportation Authorization Act.
Even if we can identify the revenues necessary to fully fund the investment levels called for in the Surface Transportation Authorization Act, a significant surface transportation investment gap will remain. The National Surface Transportation Policy and Revenue Study Commission (Policy Commission) called for an annual investment level of between $225 and $340 billion – by all levels of government and the private sector – over the next 50 years to upgrade all modes of surface transportation to a state of good repair.
Similarly, the National Surface Transportation and Infrastructure Financing Commission (Financing Commission) projects a Federal highway and transit investment gap that totals nearly $400 billion in 2010-2015, growing to about $2.3 trillion through 2035.As the Committee continues to seek the best ways to build a robust intermodal system for the future of transportation, all funding options and financing mechanisms have been and will be on the table for this discussion. This must include full utilization of innovative financing tools to leverage additional public and private investment.
While these tools should not be viewed as the silver bullet that can solve all our financing challenges, they clearly have played, and will continue to play, an important role in addressing the surface transportation investment gap. These instruments supplement—not supplant or replace—the primary financing mechanism of federal motor fuel tax and the Highway Trust Fund.
Tax exempt and tax credit bonds, loans, loan guarantees, lines of credit, and private investment can play an important role in expanding on existing funding sources to assist transportation agencies in expediting the implementation of transportation improvements—but when utilized, the focus must first be on securing the public interest and providing the maximum public benefit.
This hearing provides us an opportunity to examine the important role of innovative financing tools and programs that can assist in successfully delivering highway and transit projects. I want to welcome and thank all of our witnesses for being here today. I look forward to hearing your testimony on this important issue.
Statement Peter Defazio
At one time the U.S. led the world in surface transportation investment, which created a transportation system second to none. But since the Interstate construction era ended our investment has declined and our infrastructure has deteriorated to the point it is approaching third-world status. The deterioration of the quality of our surface transportation system has been detailed in many reports, including in two blue ribbon reports commissioned by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). The conditions of our nation’s highways, bridges, and transit systems fall far short of being in a state of good repair. Almost 61,000 miles on the National Highway System are in poor or fair condition; more than 152,000 bridges are structurally deficient or functionally obsolete; and the nation’s largest transit agencies face an $80 billion maintenance backlog to bring their rail systems to a state of good repair.
This aging infrastructure network has a direct impact on the economy. The congestion that results from our aging system impairs freight movements within the U.S. and raises the cost of American-made products. In this age of just-in-time delivery, the longer a delivery truck sits in traffic the more the product costs and the less competitive our businesses are in the global marketplace. Additionally, commercial trucks must often take detours to avoid weight-limited bridges, costing them precious time. By 2050, congestion costs could represent 14% of national GDP, up from 1.5% of GDP in 2003.
We are dramatically under-investing in our nation’s surface transportation system. We aren’t even keeping pace and maintaining the infrastructure built by the Eisenhower generation. According to the Department of Transportation’s (DOT) 2008 Conditions and Performance Report we must dramatically increase our investment to improve the performance of our system. For instance, over the next 20 years an additional $96 billion per year from all levels of government is needed to make all cost-beneficial highway improvements and to eliminate our backlog of deficient bridges, and an additional $8.3 billion per year in capital investment is necessary to improve transit conditions and performances. Additionally, the American Society of Civil Engineers estimates the nation’s infrastructure requires an investment of $2.2 trillion over the next five years to bring our infrastructure to a state of good repair. We are currently investing only $85 billion from all sources annually, and while China spends 9% of its GDP on infrastructure, the U.S. spends just 0.93% of its GDP on infrastructure investments.
While we continue to under-invest, our main source of federal transportation funding – the gas tax – hasn’t been increased since 1993 and because it’s not indexed it has lost 33% of its purchasing power over the last 17 years. We’re losing ground every day and the results of that decline in purchasing power and the lack of increased investment are clear. We now have an economy threatened by congestion.
With diminishing federal funds and shrinking state budgets, state and local governments have had to get creative in how they deliver surface transportation projects. This hearing will focus on those innovative finance tools – such as bonding, tolling, private investment, and federal-credit assistance programs like TIFIA – that help states and municipalities leverage revenue sources to deliver projects.
Today we will hear from our witnesses on which tools work well and which could use improvement. We will also explore how the federal government can better partner with local governments that have raised significant funds and provide assistance to accelerate the construction of transit and highway projects. Innovative financing tools make limited dollars stretch farther.
This Subcommittee continues to work towards a long-term authorization of our surface transportation programs that will provide a significant increase in investment. The Surface Transportation Authorization Act (STAA) will create a well-funded, streamlined and efficient transportation program. Once the STAA is complete, these financial tools will allow us to even more effectively complete projects that will benefit generations to come.
The following is the opening statement of U.S. Rep. John J. Duncan, Jr. (R-TN), Highways and Transit Subcommittee Ranking Member, from today’s hearing on using innovative financing practices to deliver surface transportation projects:
“This is an important hearing for this subcommittee. The reauthorization of the highway, transit, and highway safety programs has been stalled for almost a year now and that is largely due to the fact that we are unable to agree on how we will fund these programs in the future. Tax revenues are declining for all levels of government and everyone is being asked to do more with less. As a result, innovative financing methods will play a bigger role in the next surface transportation reauthorization bill than they have before.
“In the past, innovative financing has been associated with toll road projects. But in recent years transit projects and highway projects that do not include tolls have benefited from innovative financing. Today we will hear about Denver’s Union Station project which will utilize two USDOT loan programs, and we will hear about a tunnel project in Miami that uses innovative financing but does not include tolls.
“As the number of transportation projects that are financed with loans, bonding, or with private sector funding grow, there are important policy issues that must be addressed. We need to make sure that today’s governors and mayors do not leverage so much of their future federal funding that future governors and mayors do not have any federal money available to address the problems they will face.
“At the same time we do not want to give the federal government veto power over every financing decision made by a state DOT or a local transit agency. It will be difficult to strike the right balance between these two perspectives, but I believe that the witnesses today will provide us with valuable information that will help us move in the right direction.”
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