The Department of Transportation’s recommendations for what the Obama administration would like to see in a long-term surface transportation bill contains a mixed bag of policies, such as a dedicated freight fund and tolling of interstate highways, that has simultaneously pleased and upset stakeholders in the goods movement sector.
Transportation Secretary Anthony Foxx on Tuesday delivered the draft bill to Congress, which is set to debate a reauthorization of the two-year MAP-21 legislation that maintained spending at baseline levels and expires on Sept. 30. One of the key features of the GROW AMERICA Act is a proposal to address the pending insolvency of the Highway Trust Fund, as user fees have not kept up with the needs of states to upgrade and maintain the nation’s highways and bridges. The DOT proposal also includes provisions aimed at reducing red tape and speeding up project approvals without detracting from environmental reviews.
“At the end of the day, the important thing is that we pass a bill that avoids a destructive lapse in funding that would threaten hundreds of thousands of jobs and inflict unnecessary damage on our economy; creates millions of good new jobs building the infrastructure America will need to remain competitive in today’s economy; provides certainty to state and local governments; and allows them to engage in long-term planning and make investments we need,” Foxx said in in his Fast Lane blog.
The GROW AMERICA Act essentially puts more details around President Obama’s February 26 proposal for a four-year, $302 billion transportation spending blueprint. The Highway Trust Fund has seen its balance decline in recent years in large part because fuel taxes have not been raised in 21 years and are not indexed to inflation — which means the government can procure about 40-percent less in construction services for the same amount of money — and people are driving more fuel-efficient cars. Obama attempts to deal with the revenue shortfall by finding $150 million in extra revenue through comprehensive reform of business taxes, including $87 billion for the trust fund, but few political observers believe any agreement on tax policy, which is at the center of the nation’s political divide, can be achieved anytime soon, especially since House Ways & Means Committee Chairman Dave Camp, R-Mich., who recently offered up a tax reform plan of his own, plans to retire at the end of the year.
The administration plan, as expected, does not seek to raise the 18.3-cents-per-gallon gas tax and the 23.4-cents-per-gallon diesel tax, which groups such as the American Trucking Associations, the U.S. Chamber of Commerce and AAA say is the easiest and cheapest way to quickly fix the system and ensure adequate investment in infrastructure. Critics say the tax-reform idea represents a one-time infusion of cash rather than a long-term, sustainable source of revenue.
The trust fund began the fiscal year with $1.6 billion in reserves, but was propped up by a $9.7 billion transfer from the General Fund shortly after the new year. On March 28, that $11.3 billion total had dwindled to $8.4 billion. The uncertain funding environment has forced many states to postpone or cancel needed transportation projects because they don’t want to take on obligations they can’t afford if federal highway aid is not forthcoming. The DOT says the trust fund could go into the red sometime in August.
“For too long, Congress has undermined the success of our transportation system through inadequate funding. The U.S. was once a global leader in this area, because of our ingenuity and willingness to make tough decisions that would ultimately transform our transportation systems and lead to economic growth. Because of our shortsighted revenue decision-making, the effect has been that our infrastructure has fallen in the ranks worldwide. We’re unwilling to pay for what we so desperately need. Going forward, our economy, our global competitiveness, and the safety of the traveling public will continue to suffer unless we change course immediately,” Sen. John D. Rockefeller, chairman of the Senate Commerce, Science and Transportation Committee, said in a statement.
“Today’s proposal is one step in the right direction,” he continued. “I am pleased the administration proposed significant new funding to keep the country moving forward and to also allocate resources to where our transportation system sorely needs them — such as moving freight and improving rail service. Finding ways to pay for this bill will not be easy. The administration has proposed a number of new funding sources, and I believe Congress needs to consider these, and every other option for increased infrastructure investment should be on the table. While there is no magic solution to our transportation problems, we need to come together — for the future prosperity and safety of this nation — and move beyond the status quo.”
Transportation committee leaders in the House and Senate have said they plan to vote on transportation bills early this summer and send them to the floor for final votes so that a joint committee can iron out differences and return with final package before Sept. 30. Skepticism is high among analysts and lobbyists that a comprehensive bill will be produced this year. They believe a short-term extension of some kind that would shore up the Highway Trust Fund is more likely.
Foxx and his team envision spending $199 billion on highway infrastructure and safety programs, which represents about a 22-percent increase each year above the fiscal-year-2014 enacted level. Incentives are included to encourage regional coordination and local decision-making. Of that amount, $4 billion is earmarked for for highway and transit requests for a competitive grant program called Fixing and Accelerating Surface Transportation, designed for states and metropolitan planning organizations that adopt innovative strategies and best practices. Another $19 billion is pegged for rail programs, including nearly $5 billion for high-performance and passenger rail programs that connect cities, an Obama priority.
The administration’s plan would provide $10 billion dedicated to multimodal freight, with $5 billion distributed through a two-tiered incentive grant program for states, including the creation of a state freight advisory council and state freight plan, as well as collaborating with neighboring states to analyze needs. The remaining $5 billion, plus any unused money from the state-based incentive grant program, would be distributed through a discretionary competitive grant program to support freight-related infrastructure investments across all modes. The proposal also would codify the popular TIGER program, which offers competitive grants for multimodal and regional partnership projects, and provide it $5 billion over four years — double the amount appropriated during the previous four years.
The DOT estimates that freight tonnage will increase by 62 percent to 12 billion tons per year by 2040. Transportation and industry officials say extra highway, rail, port and pipeline capacity is needed to keep up with demand.
Groups like the Coalition for America’s Gateways and Trade Corridors have consistently advocated for dedicated freight funding, but the Obama proposal does not include a dedicated stream of revenue or a freight trust fund that would carry such investment beyond four years. Nonetheless, freight stakeholders are pleased that freight is finally getting attention in a transportation bill.
“The administration’s combination of grant programs creates a ‘Race to the Top’ for increasing freight capacity and improving conditions in freight-intensive localities across the United States,” CAGTC Executive Director Leslie Blakey said. “We are are truly pleased that freight’s economic importance has been elevated in this proposal, and we look forward to continuing our work with Congress and the administration to ensure freight receives much-needed funding in passed legislation.”
Interest groups applauded the Obama administration for getting involved in setting markers for a new transportation bill after largely sitting on the sidelines two years ago during the drafting of MAP-21, but support was more muted about the plan’s specifics.
Some trade associations were more vocal in their disappointment. The American Trucking Associations criticized the plan for its funding scheme, lifting the ban on interstate tolling, and attempting to institute a wage scale for long-haul truckers instead of the normal mileage-based pay utilized by motor carriers. Federal Motor Carrier Safety Administrator Anne Ferro said the new compensation method was necessary because drivers have an incentive to exceed federal safety limits on daily driving time so they can earn more money.
“Any proposal that moves away from a user-fee funded transportation system is not going to be acceptable to the American trucking industry, period,” ATA President and Chief Executive Officer Bill Graves said in a statement. “Furthermore, we have real questions about the viability of the administration’s plan to use one-time proceeds from an unspecified and unlikely-to-pass corporate tax reform idea, along with inefficient highway tolling or private capital financing. The focus must be on real, long-term funding answers rather than repeatedly looking for the proverbial nickels in the couch cushions.”
Dave Osiecki, ATA’s executive vice president, added, “It is clear that this administration is aiming to hijack the Highway Trust Fund and convert it into a fund to finance a myriad of projects to benefit interests that do not pay user fees into the fund.”
He said the trucking industry felt slighted by the proposal.
“While trucks move nearly 70 percent of all U.S. freight, this proposal uses the words ‘truck,’ ‘trailer’ or ‘motor carrier’ just 91 times, while referencing ‘train’ or ‘rail’ a remarkable 518 times,” Osiecki said. “And even more disheartening, the only reference to trucking in the administration’s announcement is a proposal by the Department of Transportation to impose a one-size-fits-all compensation model on an incredibly diverse industry — an extraordinarily misguided proposal for a department that claims to be data-driven.”
States have been prohibited from tolling existing interstate highways to raise money, although limited pilot programs to test tolling projects for maintaining a specific interstate have existed for about 15 years. A handful of states have applied to the DOT for permission to toll, but none have successfully implemented tolling plans due to public opposition and other factors. The Obama proposal would allow states to set up tolling authorities and toll revenue to be used for other transportation needs within a state, not just for the highway on which tolls are collected.
“Tolling has proven to be an inefficient mechanism for collecting transportation revenue, consuming up to 20 percent of revenue generated” compared to 1 percent for the fuel-fee system, Miles Morin, spokesman for the Alliance for Toll-Free Interstates, said in a statement. The Alliance includes motor carriers such as FedEx and UPS, as well as the American Trucking Association.
“The option for states to place tolls on existing interstate capacity has existed for 23 years, and not a single state has used tolls in this way — not just because the idea is unpopular, but because it’s bad policy. Tolling existing interstates is inefficient, causes traffic diversion and increases supply chain costs that hurt businesses and consumers. Transportation infrastructure needs improvements, but of all the ways to fund them, tolling existing interstates is the worst,” he said.
Chris Garrett, the owner of Golden Strip Transfer in Simpsonville, S.C., and a member of the anti-tolling coalition, wrote a commentary in the February issue of American Shipper explaining why universal tolling would harm the goods movement sector.