Passage in early December of a five-year, $305 billion surface transportation bill was a relief for the business community, which has long expressed concerns about bottlenecks and worsening road conditions that make it difficult to efficiently transport goods to domestic and international markets. The icing on the cake, from industry’s standpoint, is the new attention paid to the nation’s freight network.
Fixing America’s Surface Transportation Act (FAST) for the first time includes a strong focus on multimodal freight policy and sets aside $10.8 billion exclusively for projects aimed at improving freight flows. Previous transportation reauthorizations have been highway centric.
“We are more excited about this bill” than any over the past two decades, Leslie Blakey, president of the Coalition for America’s Gateways and Trade Corridors (CAGTC), said in a conference call with reporters. The group has pushed for a dedicated freight fund for 15 years, although its preference is to tie the program to a sustainable source of revenue in the future so that freight-related investments aren’t subject to the budget whims of lawmakers in the next reauthorization. In fact, a $70 billion user-fee shortfall (caused by lagging motor fuel and truck excise taxes) in the Highway Trust Fund is being made up by $70 billion in offsets from other parts of the federal budget, including skimming some Customs fees and surplus Federal Reserve funds.
FAST authorizes the Transportation Department to establish a new program to disburse $6.3 billion to states to be used on highways that carry lots of freight, with the money distributed by the same formula as regular highway aid. Basically, states that have more miles on the primary freight network will get more money and have to spend it there, while others can use the money to benefit freight elsewhere in the state, if they choose. And 10 percent of the pot is set aside for non-highway projects, giving states some flexibility in how the money is used.
A discretionary grant program provides another $4.5 billion for nationally significant freight projects on which states, localities and the private sector are expected to partner. It complements the National Highway Freight Program by providing dedicated funding for larger priority projects, such as gateways and trade corridors. Congress directed that $500 million of the total go towards multimodal freight projects — a recognition at long last that it takes more than highways to move freight.
Grants are best used as the last dollars brought to the table, Blakey argued. States, metro areas and the private sector should pool investments and federal grants can bridge the gap in the total cost—which is better than the traditional approach of requiring a 20 percent local match against federal funds, she said.
The grant program resembles the Projects of National and Regional Significance (PNRS) that was created in the 2005 SAFETEA-LU law, under which projects were awarded through congressional earmarks. Congressional leaders have banned earmarks in recent years, making it more difficult for lawmakers to reach consensus on funding levels. The PNRS program was reauthorized in the 2012 MAP-21 reauthorization, but it was subject to the appropriations process and never received any funding.
Projects have to be at least $100 million in size to qualify for the Nationally Significant Freight and Highway Projects Program. CAGTC Executive Director Elaine Nessle said the threshold isn’t as difficult to achieve as under PNRS, but still ensures that the money is limited to mega-projects.
CAGTC, which represents state DOTs, port authorities, metropolitan planning organizations, engineering firms and freight corridors, exceeded its goal of $2 billion in freight funding per year. However, the aggregate cap of $500 million for multimodal projects, or 10 percent of the total amount, was a bit of a disappointment.
Blakey argued earlier in the fall that the whole point of a discretionary grant program with objective, merit-based criteria is that projects with the greatest public benefit—for safety, connectivity, efficiency, economic growth—are allowed to win out.
The legislation also creates an Innovative Finance Bureau in the DOT to act as a resource for project selection and help applicants with the process of applying for loans and grants. The Innovative Finance Bureau is designed to address some of the concerns about the popular TIGER grant program related to transparency and project selection. It will be managed by the undersecretary of policy.
And it requires states to have freight plans in place to be eligible for the freight formula grants, but freight advisory boards remain optional.
Although the FAST Act invests less than plans put forth by President Obama and others, Congress did increase the total funding level for highways, mass transit and safety programs from the $105 billion over two years in MAP-21. Blakey said provisions aimed at streamlining the permitting process amount to unseen extra funds because with fewer delays less money will be wasted on bureaucratic processes and the present value of money will be maintained because it can be spent before rising construction costs and interest rates chew away at it.