Transportation infrastructure: New legislation focuses on a National Freight Fund for infrastructure improvements

Jeff Berman, Group News Editor -- Logistics Management, 10/2/2008

WASHINGTON—A piece of legislation recently introduced pledges to fund the strained freight infrastructure network in the United States.

Introduced by Congressman Adam Smith (D-Wash.), the bill, entitled H.R. 7117, the National Freight Mobility Infrastructure Act, is calling for the creation of a national fund that would be financed on an annual basis by $7-to-$9 billion in new fees from freight system users. These funds would be available only for freight projects and distributed on a competitive basis, according to the bill.

“It is essential that the federal government provide and maintain the infrastructure necessary to facilitate the commerce that drives the American economy,” Congressman Smith told LM. The National Freight Mobility Infrastructure Act will provide federal support for vital improvements to the national freight mobility network.  It will enhance transportation efficiency, reduce congestion and delays, prevent environmental degradation, and support the infrastructure that serves as a key foundation of our economy.”

According to the legislation, the $7-to-$9 billion in new fees for the fund would primarily be collected through two mechanisms:

• a waybill fee for beneficial freight rail and commercial motor vehicle cargo owners—or shippers—that is assessed against the cost of transportation and not the cost of the goods being transported; and
• a small increase in Customs fees that are already being collected, representing an additional 25 percent of the merchandise processing fee

“It is our belief that the cost of the transport of goods is going to be forced upward if we don’t take some sort of action like this to un-kink the bottlenecks to build out more capacity and increase throughput,” said Leslie Blakey, executive director of the Coalition of America’s Gateways and Trade Corridors (CAGTC), in an interview. “If we don’t do that, the consumer is going to have to pay higher prices either way. So, it would be better to have a more efficient system with more reliability, increase system efficiency across modes.”

Blakey also noted that the overall direction this bill is taking can be viewed as favorable, stating there needs to be a national freight fund, with allocations from that fund needed to prioritize the most important freight infrastructure projects that include merit-based criteria to make those determinations, as well as leverage public and private resources to create more capital to fund these projects from a wider variety of sources. She added the fund will need to be financed by freight system users and beneficiaries.

Examples of freight infrastructure projects that the national fund’s resources could be dedicated to, according to the legislation, include: grade separations at railroad, highway, and railroad-highway junctions; the construction of railroad by-passes and spurs; and the expansion of rail and highway tunnels to accommodate larger, taller, and additional volumes of vehicular and rail freight container stacks, among others.

The initiative to establish a national freight fund underlies more important transportation infrastructure issues that need to be addressed, said Dr. Sotiris Pagdadis, managing director of McKenna, Long & Aldridge LLP. The chief issue, he told LM, being the need for a national strategy for freight and goods movement in the U.S. that has been agreed upon by various port authorities and the federal government so that the freight fund can be enacted on a national strategy rather than enforcing random projects throughout the country.

“We are lacking a national strategy for goods movement,” said Pagdadis. “We are doing great at understanding the complexities that we have [on different parts of the country], but what we don’t have is a consistent language at the state, local, and federal level that says ‘we have a national strategy for goods movement’ that brings together all these different communities to act in unison. We don’t currently have that.”

Another issue, said Pagdadis, is how this bill will impact the freight user. The reason being he said is that these fees will be viewed as additional levies for moving containers from point A to point B. And the shipping community is not likely to view this bill favorably when they are already being “taxed to the hilt” with the current goods movement in place.

“They are wondering what is in it for them,” said Pagdadis. “If what they get out of it is a more effective ability to move their goods that can be assessed from a financial gains perspective, that is a different story.”