A new funding future awaits

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Can we live within a $230 billion highway funding bill? Keeping spending within those limits will require a narrowing of the scope of the federal transportation program.” –C. Kenneth Orski, a public policy consultant and 30-year veteran transportation expert, on the proposed funding levels for the next six-year highway bill

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The future funding levels for surface transportation needs in this country could be reduced pretty significantly based on the policy direction being followed by Republican John L. Mica , the new chairman of the House of Representatives’ Transportation and Infrastructure Committee.

This is not necessarily a good or bad thing, I stress, but it does mean that serious strategic thought now needs to be applied to how we go about maintaining and expanding U.S. transportation infrastructure.

There’s also a real need for speed where such new “strategic thinking” regarding highway funds is concerned, for many of our roads and bridges are in bad shape, with today’s highway networks handling a lot more traffic than ever intended.

It’ll be a tricky business, navigating between the needs of overstressed infrastructure and a smaller money purse for taking care of business, too. The video below that looks at how these two issues collide in the state of Texas sums in up pretty well.

C. Kenneth Orski, a noted public policy consultant and 30-year veteran transportation expert – a career that included a stint as associate administrator of the Urban Mass Transportation Administration under President Richard Nixon and Gerald Ford – believes we should see a new six-year surface transportation bill this summer, but one of remarkably different size and scope than the $556 billion behemoth proposed under Democrat James L. Oberstar, the former transportation committee chairman who lost his bid for re-election in his home state of Minnesota last year.

More likely, Orski thinks future funding will be limited to the revenues collected through fuel, reconciling expenditures with revenues to make sure spending does not exceed tax receipts. So, with the Congressional Budget Office projecting that fuel tax revenues should average about $38 billion per year, a six-year program could be funded at $230 billion – or about 6% lower than the last reauthorization packaged signed into law, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).

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“Keeping spending within those limits will require a narrowing of the scope of the federal transportation program,” Orski said in a speech he gave at the annual legislative conference of the International Bridge, Tunnel and Turnpike Association (IBTTA).

“Everyone agrees that the first claim on the Trust Fund resources should be to keep the nation’s existing transportation assets – both highways and transit– in a state of good repair,” he said. “Discretionary awards … should have a lower priority [and] so should programs that are deemed of little national significance—such as local community enhancements, set-asides catering to narrow constituencies and "livability" projects that more properly belong in the HUD’s [Department of Housing and Urban Development] programs than in the U.S. DOT budget.”

Orski thinks most of these trust fund “hitch hikers” – a term coined by Sen. James Inhofe (R-OK) – will have to be handed off to state and local governments, simply because the resources of the trust fund will be needed in their totality to take care of the legitimate federal objectives of maintaining, preserving and modernizing the nation’s transportation infrastructure.

“This funding crisis may finally do what conservatives have always hoped, but failed to accomplish through legislative reform: a de facto devolution of ‘non-essential’ portions of the federal-aid program to states and localities,” Orski stressed. “Will states and local governments be willing and able to assume the added responsibilities? Some will, but others may not.”

Yet it also behooves us to remember that today’s fuel tax revenues doesn’t buy what it used to – or, in the words of Pat McGarry, vice president of Manson Construction and president of the Associated General Contractors (AGC) of Washington, “a nickel just isn't what it used to be. And that's a major reason why the state is in a transportation funding bind.”

He noted that, in 2003, voters in his home state of Washington agreed to tax themselves a nickel per gallon of gas, and in 2005 agreed to tax themselves another 9.5 cents per gallon to fund 421 specific transportation projects.

McGarry said recently that targeted funding worked so, despite what he calls “the ongoing scourge of traffic jams in our most crowded corridors,” travel times and fatalities are down 21% and 6%, respectively, over the last few years, while 94% of Washington's highways are in fair or better condition, as are 98% of bridges.

“But here's the problem: as the slate of projects funded by the Nickel Gas Tax increase of 2003 and the Transportation Partnership Act of 2005 winds down, the state will have very little money to do anything more,” he explains.

There are two primary reasons for this, McGarry pointed out. The combined 14.5 cent per gallon tax increase was dedicated to the sale of bonds so the Washington state department of Transportation (WSDOT) had enough money on hand to build the significant number of projects.

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“So, every year, and for at least the next 25 years, those gas tax funds must be used to pay off the bonds sold to build the 421 projects,” he explained. “Taxpayers may understandably think that this gas tax money is accumulating each year to build another round of transportation improvements, but it's not the case. Once these projects are done, there won't be any more, yet we'll be paying off the bond debt and principal.”

Meanwhile, the money generated by the gas tax is shrinking. More fuel efficient cars and greater use of public transit means fewer gallons of gas are bought and less revenue for transportation projects. Thus, WSDOT expects $5 billion less in revenue over the next 16 years than originally projected.

And mind you, that transportation funding issues poses some challenges for the state's business climate. Each day, nearly $650 million in freight moves on Washington's roadways and 46% of the state's jobs are in freight-dependent industries.

These are just some of the difficulties faced in a future where less tax revenue is the norm. But it doesn’t mean everything grinds of a halt on our roadways, either – it just means we must be manage what dollars we have on hand a lot more wisely than in the past.

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