States face shortfall in highway aid as debate intensifies over long-term transport bill.
Transportation supporters are gearing up for another legislative push this session of Congress on behalf of a multi-year reauthorization of surface transportation programs, but ports and other business groups want any new spending blueprint to include freight-related funding for the first time.
A diverse coalition of freight stakeholders, chaired by the American Association of Port Authorities, is working again to ensure the next full multi-year reauthorization has a greater focus on freight issues and creates a dedicated fund for freight projects. Ports have an interest in surface transportation – especially the highway and rail segments that connect them to the main routes – because efficient vessel-handling is wasted if the cargo can’t easily move to and from the docks.
“This reauthorization is absolutely vital to shore up those landside connections” and make the Water Resources Reform and Development Act funding more effective, AAPA President Kurt Nagle said Thursday in a press conference during the organization’s seminar on maritime trade in Tampa, Fla.
“That freight policy needs to be multi-modal. It needs to be holistic,” and not just focus on highways, he added.
Freight advocates were pleased by some of the policy reforms in the two-year MAP-21 legislation that was extended last summer, such as the requirement that the Department of Transportation designate a Primary Freight Network of highways and the creation of a National Freight Advisory Committee. Now, they want the government to invest in multi-modal projects on key trade corridors to relieve congestion and better enable the interchange freight between modes of transport.
“For the most part we have been the stepchild of transportation,” Port Tampa Bay Chief Executive Officer Paul Anderson said.
Nearly 80 percent of U.S.-member ports require at least $10 million of investment in their landside connectors through 2025 and 31 percent require over $100 million, according to a recent AAPA survey.
Congress last May reauthorized WRRDA after several years of inaction. Maritime interests hailed the provision that ratcheted upward the use of shipping taxes in the Harbor Maintenance Trust Fund each year until the full amount collected is deployed towards channel maintenance instead of the recent practice of holding back half the money for unrelated budgetary purposes. The HMT last year took in $1.8 billion and Congress in December appropriated $1.1 billion of that for fiscal year 2015. The December funding bill also provides a 24 percent increase in the Army Corps of Engineers’ budget for new port dredging projects.
The AAPA complains that the top 59 U.S. ports are only dredged to their authorized depth and width less than half the time.
Dredging is a fundamental component of the economy, Anderson said. “I liken it to changing the oil in your engine. If you don’t do that, eventually it’s going to clog up and seize.”
The incremental $100 million increase from last year’s $1 billion for channel maintenance is a helpful step in the right direction, he said.
DOT is expected this spring to roll out the framework for its first national freight strategic plan.
Meanwhile, the most immediate concern is simply finding money to keep the Highway Trust Fund from having a low balance. About $11 billion in temporary funding from last summer expires at the end of May. Without some sort of transfer from the Treasury the Federal Highway Administration will have to start slowing payments for highway and transit aid to states for completed construction work because it will only be able to pay bills as new revenues come into the HTF. Under the law, the trust fund cannot incur a negative balance or borrow money to cover unmet obligations. States and contractors, therefore, are expected to cut back on planned construction projects unless they want to front the money for labor and materials until they can be reimbursed at some unknown point.
The number of needed highway repairs and expansion projects continues to grow while the Highway Trust Fund has lost almost 40 percent of its purchasing power since 1993, the last time the gasoline and diesel fuel taxes were raised. The HTF is also taking in less money as cars become more fuel efficient.
According to DOT, all levels of government should be investing $95.6 billion in highway improvements just to maintain current physical and performance conditions on the nation’s highways and bridges, with the amount growing to $109 billion in 2020. Adding in capacity upgrades puts the investment need at $161.7 billion today and at $184.2 billion in 2020.
Congress should provide about $49.5 billion for the federal share of maintaining current highway conditions, plus administrative and research costs. But actual funding in fiscal year 2014 under MAP-21 was $41 billion, with only about $35 billion coming from the HTF.
The National Highway System represents only 4 percent of roads in the United States, but carries 40 percent of all traffic and 60 percent of truck traffic, which makes it a good investment for the federal government to keep the economy going, the American Society of Civil Engineers said.
Last week, the Congressional Budget Office estimated the HTF faces a $168 billion shortfall over 10 years based on projected outlays for road and transit projects. DOT said it needs cash balances of at least $4 billion in the highway account and $1 billion in the transit account to meet spending obligations as they come due. CBO projects the end-of-fiscal-year 2015 balance for both accounts will be less than $500 million.
Since 2009, the Obama administration and most lawmakers have sworn off any chance of raising the gas and diesel fuel tax to raise money for the Highway Trust Fund. In recent weeks, some Republican senators have expressed willingness to put a gas tax hike on the table for discussion, but the odds still remain against such a development.
On Jan. 26, the AAA, American Trucking Associations and U.S. Chamber of Commerce wrote members of Congress in support of increased transportation funding to help relieve congestion plaguing the nation’s highways. The trade associations repeated their call for Congress to increase the gas tax.
“While no one wants to pay more, we urge you to support an increase to the federal fuels user fee, provided the funds are used to ease congestion and improve safety, because it is the most cost efficient and straightforward way to provide a steady revenue stream to the Highway Trust Fund,” the letter said.
It was countered by another letter from conservative interest groups expressing strong opposition against an increase to the federal gas tax.
A higher gas tax would increase the burden on families and businesses, while also raising the costs of goods and services on consumers, the Club for Growth and its allies said. They complained the existing transportation funding formula results in federal dollars being spent on projects such as bike paths and transit that have nothing to do with roads, as well as unrelated projects like museums.
“As with so many other issues in Washington, transportation infrastructure has a spending problem, not a revenue problem. Rather than asking Americans for even more of their hard-earned paycheck to fund reckless Washington spending, Congress should seek an alternate solution that properly prioritizes federal transportation infrastructure needs, reduces costly and time-consuming bureaucratic hurdles and further empowers state and local governments in conjunction with the private sector,” the conservative groups said.
Sen. Bernie Sanders, I-Vt., last week introduced legislation that would make a $1 trillion investment in infrastructure modernization and repairs over five years, although it doesn’t identify any new source of revenue to pay for it.
The Rebuild America Act, co-sponsored by fellow Budget Committee member Barbara Mikulski, D-Md., would divide most of the money in the following way:
- The Highway Trust Fund would receive $75 billion a year for eight years.
- A national infrastructure bank would be created with $5 billion a year that could leverage $250 billion in private capital to finance transportation, energy, environmental and telecommunications projects.
- More credit assistance provided through the Transportation Infrastructure Finance and Innovation program.
- Multimodal TIGER grant program – $5 billion a year.
- Passenger and freight rail – $15 billion a year.
- $6 billion a year for airports and to upgrade the air traffic control system.
- $145 billion for drinking and waste water infrastructure.
- $3 billion a year to improve inland waterways, coastal harbors and shipping channels to close a $16 billion gap to modernize the maritime infrastructure.
At a Senate Environment and Public Works Committee hearing Thursday, four governors said their transportation departments need funding certainty that can only come from a long-term federal program.
Freight industry lobbyists are seeking a MAP-21 follow-on that covers at least five years. Most realistically have concluded that by June Congress, at best, will pass some sort of continuing resolution to keep programs at the status quo and leave a larger bill until later.
But Nagle said a long-term, strategic, sustainable funding plan is needed.
“We can’t see another one-year extension of the status quo,” he said.
Examples of potential options for freight funding, he said, include President Obama’s GROW America Act and Rep. Janice Hahn’s proposal to create a dedicated funding source for roads and railways that connect to ports by taking a small portion of import duties collected by U.S. Customs.
The Obama plan would use a one-time collection of repatriated taxes through corporate tax reform to raise about $150 billion over four years for transportation infrastructure, including $10 billion for two multimodal freight funds.
The Obama administration will send Congress an updated version of its transportation plan from last year, Transportation Secretary Anthony Foxx told senators at the hearing.
Sens. Rand Paul, R-Ky., and Barbara Boxer, D-Calif., announced they will soon offer a bill to entice corporations to repatriate hundreds of billions of dollars in foreign profits, and use the windfall to fund transportation projects. Rep. John Delaney, D-Md., said he would introduce similar legislation in the House. Both bills would offer lower tax rates for overseas profits. Delaney said his bill would raise $120 billion to keep the HTF solvent for six or seven years.
AAPA’s Nagle suggested that comprehensive tax reform, beyond the focus on business, could result in a grand bargain that incorporates an ongoing funding mechanism, such as the use of Customs fees.
“If you would dedicate part of that funding to sustain and improve the system that allows that trade to take place, that could be part of a comprehensive tax reform package,” he explained to a reporter afterwards.
In an interview on CBS’ “60 Minutes” on Jan. 25, House Speaker John Boehner said fixing the Highway Trust Fund shortfall is a priority and that tax reform could provide some options to pay for necessary investments.