Dodd and Hagel lead a bipartisan push for transportation infrastructure funding

Jeff Berman, Senior Editor -- Logistics Management, 3/17/2008

WASHINGTON—The concept and strategy of transportation infrastructure continues to gain momentum, as evidenced by a recent hearing held by the Senate Committee on Banking, Housing and Urban Affairs which focused on legislation that would establish an infrastructure bank that would be charged with “evaluating and financing capacity-building infrastructure projects of substantial regional and national significance.”

The bipartisan legislation, entitled “S.1926, The National Infrastructure Bank Act of 2007,” was introduced last August by Senators Chris Dodd (D-Connecticut) and Chuck Hagel (D-Nebraska). The senators say the bill is based on the current situation the United States is facing, with insufficient transportation infrastructure, significant increases in freight projected in the coming years, the role that traffic congestion is playing in an already diminishing economy, and the current spike in fuel prices.

Dodd and Hagel say this infrastructure bank would focus on infrastructure initiatives such as publicly-owned mass-transit systems, roads, and bridges, among others. And they added that projects with at least a potential Federal investment of $75 million are the ones that the bank will focus on. The bank would use what the Senators called a “sliding scale method” that gauges measurements such as the type of infrastructure system or systems, project location and cost, current and projected usage, reduction in traffic congestion, and environmental benefits.

And when an investment level is determined for a project, the infrastructure bank would develop a financing package with the Federal government, which could include direct subsidies, direct loan guarantees, long-term tax credit general purpose bonds, and long-term tax-credit infrastructure project-specific bonds. The legislation also notes that these bonds can be up to $60 billion.

“The current infrastructure in our country is wholly inadequate to handle the demands of a 21^st century economy,” Dodd said last year. “This measure can help rebuild our roads, bridges, transit and water systems…and spur jobs and economic growth.”

Noted experts in the transportation industry both agree with Dodd, commenting that more needs to be done outside traditional methods to get transportation infrastructure initiatives the attention it needs.

“This echoes what the National Surface Transportation Policy and Revenue Study Commission said in their report earlier this year,” said Mort Downey, chairman of OB Consult and former Deputy Secretary of Transportation. “The report was basically saying that new ways of [transportation infrastructure] financing are something we should be looking at.”

The Commission’s detailed report called for increased government transportation spending to at least $225 billion per year for the next 50 years compared to the less than 40 percent spent today, raising the gas tax from 25-to-40 cents per gallon per year over the next five years, increasing tolling to add interstate capacity, congestion pricing in metropolitan areas, and bringing private capital into surface transportation projects through public-private partnerships that can help facilitate international trade with intermodal connections and relieve congestion that adds time and costs to the supply chain.

And focusing on projects of $75 million or more could be beneficial, Downey said, because these are the types of projects that are typically hard to “shoehorn” into the normal budgetary process for transportation agencies. But the infrastructure bank could be very flexible in how it would provide support, and he expects that it would have more patience with major projects that are time-consuming due to the economic payoff these goods-movement projects would have for shippers for things like truck-only toll lanes, improving railroad capacity, and connecting roads to ports.

Gilbert E. Carmichael, senior chairman of the board of directors of the Intermodal Transportation Institute (ITI) at the University of Denver, said in an interview the concept of an infrastructure bank makes sense on a number of levels. One reason for this, he said, is that the U.S. transportation system is in a crisis.

“We are trapped as a nation, because the old Highway Trust Fund has done a good job of building the interstate system, but there is no way politically we can build it out further,” said Carmichael. “We need an alternative, and the infrastructure bank makes sense.”

Another reason this legislation has potential, according to Carmichael, is that the American public is not likely to allow the government to raise the gas tax. But he said the idea of a national infrastructure bank dedicated to transportation may get more buy-in.

Senate budget signs off on infrastructure

Transportation infrastructure also got a boost last week when the United States Senate’s Fiscal Year 2009 budget resolution included funding for “ready to go” transportation infrastructure projects to $7 billion. This doubles the previously allocated $3.5 billion. It was introduced through an amendment from Senator Ben Nelson (D-Nebraska).