October 18, 2017

Last week, the Highways and Transit Subcommittee of the House Transportation and Infrastructure Committee held a hearing to examine highway and transit stakeholder views on U.S. infrastructure needs.

(This was the finale of a five-part series in which all of the T&I subcommitees (save Aviation, which is busy with other stuff) held hearings to highlight stakeholder perspectives on their infrastructure needs: Economic Development, Water Resources, Coast Guard/Maritime, Railroads, and now Highways and Transit. The rail hearing is covered elsewhere in this week’s issue of ETW.)

The hearing received testimony from most of the primary constellations of highway and transit stakeholder groups:

• State DOTs, represented by Patrick McKenna of Missouri DOT (written testimony here);
• The construction industry, represented by James Roberts of Granite Construction (written testimony here);
• Labor unions, represented by Brent Booker of the AFL-CIO Building Trades Division (written testimony here);
• The manufacturing sector, represented by Ray McCarthy of the Associated Industries of Missouri (written testimony here); and
• Mass transit, as represented by Peter Rogoff of Sound Transit (written testimony here).

The federal-aid highway and mass transit programs write an average of over $200 million per business day in checks to state DOTs and local mass transit agencies ($55.3 billion in FY 2017 apportionments and allocations divided by 250-odd business days per year). Most of that money masses through to the construction companies, which then pass much of it through to the labor unions, and the economic benefits of the completed projects are felt by manufacturers.

So the wish lists of the stakeholder groups can always be expected to revolve around money – more money, delivered more reliably, guaranteed as long as possible into the future, with as few strings attached as possible. (Ed. Note: Because who among us doesn’t want other people to give us as much money as possible, for as long as possible, with the fewest possible strings attached?)

But before the witnesses could talk, the leaders of the T&I Committee set the stage, starting with subcommittee chairman Sam Graves (R-MO – note the heavy Show Me State presence on the witness list), subcommittee ranking minority member Eleanor Holmes Norton (D-DC), full committee chairman Bill Shuster (R-PA) and full committee RMM Peter DeFazio (D-OR). All of these danced around, to some extent, the long-rumored Trump Administration infrastructure bill, with the Democrats focusing on real tax dollars for real specific programs (particularly for ongoing programs, not new programs), and DeFazio protesting that Congress was still “talking while the country crumbles” instead of acting on an infrastructure plan, with or without input from the White House.

The five witnesses then summarized their opening statements, which to some extent had a division of labor. The state DOT testimony focused on program funding, with a reiteration of the excellent AASHTO matrix of revenue options. The construction industry testimony had a nice five-page summary of the project delivery improvement provisions in MAP-21 versus those in the FAST Act as well as the nightmare flowchart that AGC has produced.

PPPs and Asset Recycling. Chairman Shuster led off with a discussion on public-private partnerships (PPPs or P3s), saying they are “not a silver bullet but helluva good tool to have in tool bag.” He also promoted the related concept of “asset recycling” (a PPP where a private concessionnaire takes out a long-term lease to operate taxpayer-built infrastructure and gives a large up-front payment to the government which is then used to build new infrastructure). McKenna from Missouri DOT said they are looking at PPPs for Missouri airports, while Roberts from Granite Construction emphasized that it was important to look at the out-years of any such deal (specifically, that sometimes short-term monetization presents long-term problems). Booker (Building Trades) repeated some of Shuster’s statement, about how not all such projects are created equal and some are better fits for PPPs or asset recycling than others.

DeFazio then responded to Shuster, reminding everyone that a T&I task force did its own PPP study few years ago, which concluded that PPPs could, at most, handle 10 to 12 percent of U.S.  infrastructure needs – in DeFazio’s words, “not really the major tool in the toolbox.” He also said that P3 toll roads average 30 cents per mile while non-P3 toll mile average 14 cpm. (Later in the questioning, Shuster and DeFazio got into a back and forth over the specifics of the Australian experience with asset recycling, particularly in the state of New South Wales. (Plug: Eno recently held a webinar with the Australian Ambassador to the U.S. on asset recycling – see recording here.) Shuster also said that through best practices, it might be possible to turn P3s from a tool that can cover 10-12 percent of the need into a tool that could address 15-18 percent of the need.

State and Local Financial Responsibility. DeFazio then mentioned that 24 states already raised gas taxes and other highway user revenues in order to pay for increased infrastructure needs, and that the Trump Administration is discussing ways to incentivize other states to do the same. He asked the panel if any such incentive program should have a “lookback” provision so that the states that have recently raised their own revenues are not penalized for having done so before the incentive program was created. Peter Rogoff responded that minimum “level of effort” requirements have been enacted in the past, and mentioned the “state level of effort” methodology first studied by USDOT due to Senator Byrd’s efforts in section 6013 of the 1991 ISTEA law.

Rep. Norton took up the theme of the Trump Administration’s “help those who help themselves” theory of infrastructure finance, pointing out that the new DC Metrorail stop at New York Avenue was funded by local businesses and the local government, not with federal dollars. Rogoff replied that their proposed new transit projects in Seattle only had federal new start shares of 40 percent (Lynwood) and 25 percent (Federal Way), but also noted that the President’s budget had singled out the low federal share of those particular projects as a justification for cutting mass transit spending.

The issue of state funding also took a local and partisan turn, with members of the California delegation condemning (Republicans) or praising (Democrats) the massive gas tax and automotive fee increase that the Golden State enacted this year to pay for a program of transportation spending (SB 1). Doug LaMalfa (R-CA) criticized SB 1 as a partisan initiative and said that many voters simply don’t trust the state government to spend the money on roads. Grace Napolitano (D-CA) defended SB 1 and said she hoped that the federal government would do what California did – raise a host of taxes and fees on system users, not just the gas tax.

Rick Larsen (D-WA) later volunteered that he had voted for Sound Transit’s tax increase. This led to a discussion of how even though Congress is likely to reject President Trump’s proposals to kill the new starts program, the delays caused by the budget are delaying the two new Seattle projects. He also mentioned that Sound Transit’s master credit agreement from the federal TIFIA loan program will save them an estimated $200 to $300 million in debt service costs.

Highway Trust Fund. Rep. Rodney Davis (R-IL) asked the witnesses for a show of hands from anyone who thought that the federal Highway Trust Fund could be stabilized simply by increasing the gas tax (no volunteers). This led to a discussion of alternative user charges, especially on electric vehicles. McKenna pointed out that Georgia recently added a fleet fuel economy adjustment to vehicle registration fees to compensate for increasing mileage standards. Rogoff noted that Washington State took advantage of the initial round of research grants on alternative user charge mechanisms provided by the FAST Act and was working on a pilot project with Oregon and Idaho. Chairman Graves later mentioned that Missouri is also taking advantage of study money.

Hank Johnson (D-GA) later asked for another show of hands from the panel if any of them thought that public-private partnerships could completely substitute for taxpayer dollars (again, no takers). Then he asked witnesses to raise their hands if they believed the federal gas tax will remain viable, which got the support of everyone except Rogoff, who quibbled on definition of “remain viable” Then another show of hands from witnesses who think the federal gas tax should be increased? This gave three firm “yes,” McCarty pledging support as part of a package, and Rogoff withholding because, as he said, Washington State has just increased gas tax and he answers to a board of elected officials who do not have a position.

Freight. Rep. Alan Lowenthal (D-CA) mentioned that he has introduced legislation (H.R. 3001) providing a dedicated federal funding stream for freight through a 1 percent freight waybill fee which would raise $8 billion per year. (Ed. Note: this is similar to what the Eno Center’s Freight Working Group recommended in a paper last year.) He then got McKenna to admit that even though the FAST Act requires states to identify freight networks and adopt freight strategic plans, at the present, states don’t have the financial resources to improve freight corridors or even meet current needs.