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US surface transportation bill extension: Necessary but not sufficient [free access]

October 1, 2011

On September 15, 2011, the United States Senate approved a temporary extension for the surface transportation and federal aviation programmes. The “Surface and Air Transportation Programs Extension Act of 2011” (HR2887) will extend funding at status quo level for another six months. Senators voted 92-6 on a “clean” bill, which allows surface transportation programmes to be funded and operate at present levels through March 31, 2012. Effectively, the recent bill extends the government’s authority to collect fuel taxes, the excise tax on heavy equipment, tire taxes and the heavy vehicle use tax that make up the Highway Trust Fund.

 

The vote marks the eighth temporary extension for surface transportation programmes since the bill known as SAFETEA-LU, the most recent multi-year funding authorisation, expired in September 2009. A brief description of the SAFETEA-LU is provided in Box 1.

 

 

Box 1: SAFETEA- LU

 

On August 10, 2005, the President of the US signed into law the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). With guaranteed funding for highways, highway safety, and public transportation totalling USD244.1 billion, SAFETEA-LU represents the largest surface transportation investment ever made by the United States government. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21) shaped the highway programme to meet the country’s changing transportation needs. SAFETEA-LU builds on this firm foundation, supplying the funds and refining the programmatic framework for investments needed to maintain and grow the country’s vital transportation infrastructure. 

 

SAFETEA-LU addresses the many challenges facing the US transportation system today—challenges such as improving safety, reducing traffic congestion, improving efficiency in freight movement, increasing intermodal connectivity, and protecting the environment—as well as laying the groundwork for addressing future challenges. SAFETEA-LU promotes more efficient and effective Federal surface transportation programmes by focusing on transportation issues of national significance, while giving State and local transportation decision makers more flexibility for solving transportation problems in their communities. 

 

Source: Federal Highway Administration

 

Urgent need

 

According to the National Economic Council, the President's principal forum for considering national security and foreign policy matters, failure to extend the surface transportation programmes could have shut down more than 134,000 active highway and bridge projects, over 5,000 active transit projects, and cost over a million jobs. At the local level, state and local authorities would have been subject to significant financial exposure as they currently expend their own resources before being reimbursed by the federal government.

 

Proposals for long-term bill

 

The House and Senate committees are now back to working on a longer-term replacement bill but each has its own version which differs markedly from the other. A comparison of the two versions of the bill is provided in Table 1.

 

Senate

 

There are three committees that are involved with transportation in the Senate, but the most important is the Environment and Public Works (EPW) Committee. The Senate version is a two-year authorisation bill (for FY2012 and FY2013) providing funding worth USD109 billion to support spending at the existing level. However, its major source of funding, the current 18.4-cents-a-gallon Federal gas tax which flows into the Highway Trust Fund, leaves another USD12 billion or so be drawn from other sources, yet to be identified.

 

House

 

House Republicans are pushing for a full-duration, standard six-year bill providing funding worth USD230 billion. Their plan would reduce transportation spending by about a third from the existing USD286 billion authorised by SAFETEA-LU, as it authorises only as much money as the Highway Trust Fund collects in revenues. 

 

The USD230 billion proposal equals about USD35 billion per year starting in FY2012 (versus the current USD51 billion per year), which could be more than doubled to approximately USD75 billion by leveraging existing resources, expediting and streamlining project delivery, reducing bureaucracy and red tape, increasing state flexibility, reforming and consolidating programmes, and expanding loan programmes.  

 

The bill has a provision to allow state departments of transportation to opt-out of the federal-aid highway and transit programmes. States that opt-out would no longer be required to pay a federal gas tax or comply with federal mandates or restrictions.

 

 

Table 1: Comparison of the Senate and House versions of the surface transportation bill

 

Senate

 

Two year duration (FY2012 and FY2013)

Funding support of USD109 billion

Supports funding at current level

Increases the Transportation Infrastructure Finance and Innovation Act (TIFIA) funding to USD1 billion a year

Consolidates highway programmes

Includes changes to speed up approval for project funding

 

House

 

Six-year duration

Funding support of USD230 billion

Involves spending cuts up to 34 per cent

Increases TIFIA funding to USD1 billion a year

Consolidates highway programmes

Cuts operating subsidy for Amtrak by 25 per cent in 2012 and 2013

 

Sources: House Transportation Infrastructure Committee, and Senate Environment and Public Works Committee

 

Comparison

 

Both the Administration and House Republicans agree on expanding the Transportation Infrastructure Finance and Innovation Act (TIFIA) programme, which provides low-cost loans, loan guarantees and lines of credit to states, cities, regional transit agencies and private companies for executing projects. The financing terms in TIFIA are more favourable than those in the private sector. Both the House and Senate proposals propose to increase annual funding for the programme by roughly tenfold, to about USD1 billion, while also modifying standards to allow more projects to qualify for aid.

 

The Los Angeles County Metropolitan Transportation Authority recently secured a TIFIA loan covering about a third of a USD1.7 billion project to build an 8.5-mile light-rail line linking northern and southern neighbourhoods to the Los Angeles International Airport.

 

Both the House and Senate bills make a point of streamlining the various agencies that address transportation (mostly through consolidation), decry earmarks, seek to expedite the regulatory approval process for transportation projects, value best business practices in project selection, and strive to make the current system more agile and responsive to actual conditions.

The House bill does not propose the creation of a new federal transit safety office, whereas the Senate bill does propose the creation of such an office.

 

Going forward, lawmakers have through the end of March 2012 to put forth a longer-term bill or be forced to decide on another temporary extension. There is no doubt that a comprehensive long-term bill would help create jobs, particularly in the construction industry, which has been hit hard by the economic downturn. A long term investment plan of the government is essential for the transit agencies and the industry to align their own priorities for investment. The demand in the public transportation sector is huge and the sooner the government can outline its plan, the better it would be for boosting the country’s economic activity.