Time to treat transportation funding as a business, DOT Secretary Peters tells U.S. commerce leaders

John D. Schulz, Contributing Editor -- Logistics Management, 2/14/2007

WASHINGTON—The United States needs to employ innovative public-private partnerships to combat increasingly crippling congestion on its aging transportation infrastructure system, Transportation Secretary Mary E. Peters told American business leaders at the U.S. Chamber of Commerce symposium on transportation and the global economy on Feb. 13.

Traditionally, transportation has been funded by a combination of federal and state governments, but government funds no longer are sufficient to meet demands of the future. Forecasts of up to 70 percent growth in freight demand in the next 10 years are causing federal and state officials to rethink the way transport projects are funded, Peters said.

“For many years, transportation was government-planned and government-made,” Peters said. “Transportation is a business. If we treat it as a business, maybe it can become a source of growth in America, rather than a source of irritation.”

Peters called increasing private enterprise in transport projects “one of the most exciting things in transportation today.”

State budgets are being strained for transportation and fuel taxes are no longer enough to sufficiently fund transport projects, Peters said.Involving the private sector also promotes better accountability than government, she added.

“The free market can deliver to transportation innovation and quality that it has long delivered in U.S. business,” Peters said. “It’s an idea whose time has come.”

Peters, who has more than 20 years experience in transportation, formerly served as Federal Highway Administrator and director of the Arizona State Department of Transportation.

“America’s transportation system, once the envy of the world, is being stretched beyond its capacity,” said Carol Hallett, counselor to the U.S. Chamber, which has been actively lobbying for more transport spending. Railroads, ports, interstates, airports and links to intermodal facilities are all “wearing out,” according to Hallett.

Peters said traffic congestion, delays in the skies and on the ground, lack of capacity, and the aging infrastructure are all threatening U.S. competitiveness. Even the railroads, which once had an oversupply of capacity, are overflowing with freight. The rail industry long has embraced public-private partnerships to help finance capacity expansion that otherwise would be impossible if the railroads had to pay solely for those improvements.

Craig F. Rockey, vice president of policy and economics for the Association of American Railroads, said the rail industry is backing a 25 percent investment tax credit for private-sector expenditures to help create more rail capacity.

T. Peter Ruane, president and CEO of the American Road and Transport Builders Association (ARTBA), said the nation’s productivity is threatened by a lack of long-term planning for transportation expansion and funding. He said there is a $45 billion gap in transportation funding just to maintain the current system at adequate funding levels.

The trucking industry loses more than 200 million hours a year (at a cost of $8 billion) because of costs associated with congestion, Ruane said.And congestion is growing by 8 percent a year. Delays at one major border crossing, the Ambassador Bridge in Detroit, cost truckers between $150 million and $200 million annually.

ARTBA is backing a plan that would index the fuel tax (now 18.4 cents a gallon for gasoline, 23.4 cents for diesel, unchanged since 1993) to inflation. By 2015, inflation will have eroded the spending power of those taxes by 70 percent. Ruane said his group is also backing public-private projects, including intermodal connectors and “truck-only” lanes on key interstate lanes.

Peters said her priorities at DOT include improving performance and assuring the nation has “21st century solutions for 21st century” transport challenges. “America’s businesses unfortunately are spending a lot of time in the slow lane,” Peters said.

Peters went on to say that America cannot afford being tied up in traffic. “Our status quo is threatening economic freedom which is so important to this country,” she said.

The federal DOT has estimated delays in the U.S. transport system cost this country $200 billion annually, or about 2 percent of Gross Domestic Product (GDP).

The most recent $3 trillion budget includes $175 million for what Peters called a “congestion relief strategy” that would target congestion in cities, ports, borders, airports, and interstates. Beginning this spring the federal government plans to dole out $230 million in grants for localities to build electronic toll systems to help ease congestion and steer traffic into using “peak-pricing” tolls to spread out traffic.

“Everyone from governors to mayors to business leaders has expressed great interest in this initiative,” Peters said. “We are focused on keeping this plan moving forward.”

In the skies, Peters is working to open international markets, especially to the Far East.

In April, DOT will add 12 new air cargo flights to China. Peters said she will personally travel to China this spring to lobby for more direct flights. And she’s working on more than just air: Next month Peters said she plans to meet with ministers of transport of Mexico and Canada on transport-related issues.

“Our goal is to free all of us to make daily decisions without worrying about whether we’ll get there on time,” Peters said.