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Transportation Infrastructure in the Post MAP-21 Era

Posted by Ken Orski on Monday, October 22nd, 2012

Innovation NewsBriefs
Vol. 23, No. 27

Comment by Kenneth Orski, Publisher, Innovation Briefs, reprinted from the National Journal’s Transportation Experts Blog,”Scaling Back on Infrastructure,” week of October 15

Infrastructure has been absent from the political dialogue
Proponents of a more robust level of spending for transportation infrastructure ignore the political realities. With mounting deficits and the shadow of a $16 trillion debt hovering over all fiscal decisions, Congress is not about to vastly increase spending on transportation. Concern about deteriorating infrastructure has failed to resonate with the electorate during the election campaign. The promise of transportation spending as a job creator proved to be illusory and to have little political credibility as a countercyclical remedy. Infrastructure projects have shown to be hardly “shovel ready.”  Nor have the presidential condidates bothered to mention transportation in their debates on domestic priorities, despite pleas by stakeholder groups to include infrastructure on the political agenda. The absence of transportation in the political dialogue has surprised and disappointed  transportation advocates.
 
Believers in the Infrastructure crisis decry this supposed “indifference” or “short-sightedness” on the part of the Congress and the general public. But their anger and frustration are misplaced. People recognize and acknowledge the need to modernize and expand the nation’s infrastructure.  They simply are not convinced by the “sky is falling” rhetoric employed by the alarmists—dire warnings of collapsing bridges and crumbling roads if  government does not greatly increase spending on infrastructure.
 
No Signs of “Crumbling Infrastructure”
As the Washington Post editorialized no too long ago, people see no signs of  “crumbling infrastructure.” They trust their own eyes more than they trust the unverified claims of  the experts —and what they see is highways and transit networks that are well maintained and functioning smoothly and reliably in most of the places most of the time. They suspect that  warnings of catastrophic consequences if spending on infrastructure is not boosted, are overblown, self-serving, and more often than not inspired by liberal advocacy groups, lobbyists, professional associations and industry spokesmen who have a financial stake in pushing for more federal spending.  As one senior congressional aide confided to us, “I don’t see our constituents lobbying to raise the gas tax in order to spend more money on transportation.”  We suspect most lawmakers on Capitol Hill share this view.
 
Moreover, the public is not sure that all of the billions of dollars that the federal government already devotes to  transportation ($114 billion in FY 2012 for all modes) are spent  wisely, nor that more money will make the transportation system perform any better. According to Sen. Tom Coburn (R-OK) who publishes an annual “Wastebook” report on government spending, “billions of dollars intended for transportation are wasted on questionable projects that do little to fix congestion or other transportation problems.”
 
Transition to Short-term Authorizations
The fiscal and political climate in the next few years will make the job of convincing the skeptical electorate to support higher transportation spending even harder. There is a broad bipartisan consensus that raising government expenditures must be subordinated to the overriding imperative to get the nation’s fiscal house in order. Funding constraints will continue to make it difficult if not downright impossible for Congress to commit hundreds of billions of federal dollars in a single legislative package regardless of which party controls the purse strings. Unwilling to raise fuel taxes and unable to identify other sources of dedicated funding, Congress is likely to embrace short-term bills as a convenient way out of the dilemma. Short-term authorizations such as MAP-21 (the two-year bill reauthorizing the federal surface transportation program through September 30, 2014) will require only modest transfers from the general fund —especially if states are willing to step in with increased contributions of their own. On the other hand, a six-year bill would require an injection of nearly $90 billion in general revenue—and this just to maintain current  (FY 2013) spending levels.  

To be sure, some in the stakeholder community will contend that longer-term (i.e. five- or six-year) authorizations are necessary to allow for orderly planning and implementation of capital projects. They will argue that short-term bills will not provide the kind of funding certainty that major public works require. But  large capital investments seldom figure on contemporary State DOTs’ and transit authorities’ agendas any more. “Frankly, many of the current state DOT leaders don’t remember what it was like to have a long-term funding program like we had in the 1990s,” one highly respected former DOT director told us. To the extent that large infrastructure projects still appear on state DOTs’ drawing boards,  private capital, tolling, and credit instruments such as TIFIA and state infrastructure banks, will provide adequate alternatives to the funding stability that long-term congressional  authorizations offered in years past.

From Funding to Financing
The bottom line:  regardless of the outcome of the November elections, do not expect a boost in federal transportation spending. Look instead for a shift from funding to financing —shift fueled by vastly expanded TIFIA lending authority (by more than 600 percent, from $122 million in FY 2012 to $750 million in FY 2013) and by billions of dollars worth of accumulated equity in pension funds and  private infrastructure investment funds, reportedly numbering some 140 at the latest count.
 
The prospect of  public and private financing replacing dwindling federal funding dominated discussion among financial practitioners at ARTBA’s Public-Private Partnership Conference in Washington D.C. on October 10-11. Participants were encouraged to hear that 19 projects worth $27.5 billion have already submitted letters of interest for TIFIA loans in the past three months. More applications are certain  to follow as it becomes abundantly clear that the Highway Trust Fund can no longer serve as a source of capital for transportation infrastructure beyond fiscal year 2014.  
 
In sum, short-term transportation authorizations, supplemented by public and private financing of costly infrastructure projects seem like the most likely scenario in the post MAP-21 era.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.


 

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