White House unveils 4-year, $302 billion transportation infrastructure plan

In a speech at the Union Depot train station in St. Paul, Minnesota yesterday, President Barack Obama again called for increased investment in transportation infrastructure as a way to spur job creation and repairing and modernizing the nation’s roads, bridges, railways, and transit systems.

“Other countries are not waiting to rebuild their infrastructure,” Obama told the audience. “They’re trying to out-build us today so they can out-compete us tomorrow.  As a percentage of GDP, countries like China, Germany, they’re spending about twice what we’re spending in order to build infrastructure—because they know that if they have the fastest trains on the planet or the highest-rated airports or the busiest, most efficient ports that businesses will go there.”

The White House’s “Vision for 21st Century Infrastructure calls for a four-year, $302 billion transportation reauthorization bill, which would be paid for, in part, by using $150 billion in one-time transition revenue from pro-growth business tax reform “to address the funding crisis facing our surface transportation programs and increase infrastructure investment. This amount is sufficient to not only fill the current funding gap in the Highway Trust Fund (HTF), but increase surface transportation investment over current projected levels by nearly $90 billion over the next four years.”

With the Congressional Budget Office noting the HTF will be insolvent by 2015 and facing a $77 billion deficit through 2019 without an increase in the federal fuel tax, which is unlikely for political reasons, and the Department of Transportation indicating that it needs at least $4 billion in cash balances available in the highway account and at least $1 billion in the transit account to meet obligations as they are due, times are dire for the HTF, which has relied on transfers from the U.S. General Trust Fund to remain solvent in recent years. And in its proposal the White House is asking for $63 billion to fill the funding gap in the HTF to meet the nation’s short-term highway, bridge, and transit needs and address the HTF’s insolvency for four years.

Separately related to the HTF, House Ways and Means Committee chairman Dave Camp, R-Mich., allocated $126.5 billion to the HTF to keep financial levels afloat for infrastructure funding over an eight-year period in his Tax Reform Act of 2014 legislation released earlier this week.

Other supply chain- and freight-related components of the White House’s plan include:
-$206 million to invest in the nation’s highway system and road safety, which would increase the amount of highway funds by 22 percent annually for roughly $199 billion over four years and provide more than $7 billion for highway and road safety improvements;
-$9 billion in competitive funding to spur innovation and make permanent and provide $5 billion over four years for the TIGER grant program and $4 billion of competitively awarded funding to incentivize innovation local policy reforms for transportation systems;
-$10 billion for a new freight program to augment U.S. exports and trade in the form of a multimodal freight grant program in partnership with state and local officials and private sector labor representatives for rail, port, and highway projects addressing the “greatest needs for the efficient movement of goods across the country and abroad”; and
-$4 billion to attract private investment in transportation infrastructure, calling for continued funding of $1 billion in annual credit subsidy for the successful TIFIA loan program that, similar to other Administration proposals such as capitalizing a National Infrastructure Bank, creating American Fast Forward bonds, or enacting Foreign Investment in Real Property Tax Act (FIRPTA) reforms, will facilitate increased private investment in transportation infrastructure while protecting taxpayer interests

Freight stakeholders were generally positive about the White House’s proposal.

“I think they are on the right track here,” said Leslie Blakey, executive director of the Coalition of America’s Gateways and Trade Corridors. “It is good news overall, especially the $10 billion for a multimodal freight grant program. It is in line with what we have been asking for in the past. And the fact that Congress has been increasingly recognizing that things like this are really critical to fund, coupled with the Administration taking the lead and setting funding goals and thinking about it in a different way is evidence of good collaboration.”

But how to fund these efforts is, and remains, challenging, given the lack of political will to raise the HTF, which has remained at the same levels since 1993.

“We need user-related revenues that are stable, predictable and growing to provide the certainty needed for planning and making capital investments,” Janet Kavinoky, executive director of transportation and infrastructure at the U.S. Chamber of Commerce, told Bloomberg News.

And Eno Center for Transportation President and CEO Joshua Schank said in a recent interview this transportation talk truly needs to be put into action.

“What exactly is he going to do to push that legislation through and to what extent is he capable of doing anything, given where his approval ratings are?” commented Schank. “MAP-21 depends entirely on finding money to fund it, and I don’t know how any closer we are to that. The President has mentioned corporate tax reform as a way to fund infrastructure in the past and primarily mentioned it as a one-time infusion of cash rather than a long-term sustainable investment strategy, which is what I would imagine people operating ports and freight and logistics would care about. They are looking for a long-term transportation investment strategy.”

Schank said the current state of U.S. transportation infrastructure is south of being “stuck in neutral,” as neutral would be staying the course and not changing things, but he said things are worse than that as there is no certainty with respect to funding due to the volatile nature of the Highway Trust Fund, which makes it harder to make wise investment decisions over the long-term.