Streetsblog Capitol Hill

On January 6, 1983, the icon of the modern conservative movement, Ronald Reagan, signed legislation to raise the gas tax for the first time in more than two decades, devoting a portion of the revenue to transit.

We’ve been reading about this moment a lot, as the current GOP leadership in the House tries to undo Reagan’s legacy by eviscerating dedicated transit funding.

In this ABC News clip, you can see that Reagan touted the measure, a five cent gas tax increase, as an economic catalyst. It would raise $5.5 billion for transportation investment and result in 320,000 new jobs, the administration said. The measure even reserved one cent per gallon for transit, all for the cost of about $30 a year for the average driver.

Sounds like a win-win, right? After some initial resistance to the idea, Reagan eventually came around to that perspective, even if some special interest groups (truckers) didn’t.

What a difference 29 years makes.

When Senator Jeff Sessions of Alabama balked at the increase in transportation spending recommended by President Obama’s 2013 budget, Secretary of Transportation Ray LaHood did not mince words: “America is one big pothole,” he said.

Secretary LaHood defended the president's proposal to pay for transportation using war savings. Photo: Senate Budget Committee

LaHood was testifying before the Senate Budget Committee yesterday to explain and defend the President’s proposed transportation budget, as he has done for each of the past three years. And just as in previous years, LaHood was forced onto the defensive. The budget recommends a six-year surface transportation program worth $476 billion, including $47 billion for one of Obama’s signature transportation initiatives, high-speed rail.

Obama’s budget even includes a pay-for, albeit a controversial one: The President proposes to take half of the expected savings from removing troops from Iraq and Afghanistan and spend it on transportation, while using the other half to pay down the national debt.

Using war savings to pay for transportation elicited doubts from committee leaders from both parties yesterday. Sessions, a Republican, pointed out that “we borrowed money to pay for the war,” rather than raise taxes to fight it, “so when the war ends we just don’t have to borrow as much.” Sessions also pointed out that the war savings figure endorsed by the Congressional Budget Office uses a model that assumes ten years of spending at current levels, and nobody expects America to maintain anything resembling its current troop presence in Afghanistan for ten years.

Chairman Kent Conrad was more measured in his concern: “War funding is very unpredictable… I’ve always been reluctant to use war savings to pay for something, that’s a bonus in terms of bringing down deficits and debt.”

LaHood said he liked Obama’s pay-for plan, and was especially excited that Congress could no longer accuse the president of proposing investment without a revenue source. As to the reliability of war savings: “War is not in my portfolio,” LaHood said.

When LaHood was grilled by Kelly Ayotte (R-NH) about why the federal government would ever want to be in the business of subsidizing high-speed rail, Mark Begich (D-AK) came to his defense: “We subsidize roads, big time… I understand the senator’s concern about HSR but the point is, we subsidize all of it: You name it, we subsidize it, because it’s good for business if we do it right.”

However, the committee was largely silent on suggesting any alternative funding sources. Ron Johnson (R-WI) hit upon the unspoken theme of the past three years of reauthorization efforts when he said, “It’s politically poisonous to raise the gas tax, so why not look at utilizing energy resources?” The question was reminiscent of an exchange between senators Michael Enzi and Max Baucus during last week’s Finance Committee hearing, when Enzi proposed — and immediately withdrew — an amendment indexing the federal gas tax to inflation, just to prove a point about the supposed necessity of using oil and gas drilling as a revenue source. Increasing, or at least indexing, the gas tax would appear be the simplest way to stabilize the highway trust fund while staying true(ish) to a “user pays/user benefits” principle, but it faces a mountain of political inertia. The last time the gas tax was raised was in 1993.

President Obama has released his budget request for the 2013 fiscal year, which includes a proposed $476 billion investment in transportation over six years. High-speed rail, mass transit, and bridge repair would get a big boost under Obama’s plan, which is paid for primarily by war savings as America’s troop presence is drawn down in Afghanistan.

Parts of Obama's American Jobs Act have made a return in his 2013 budget proposal. Photo: SHRM

The good news is that the president is still committed to investment in transportation infrastructure, with a focus on expanding transit and rail while maintaining roads that have already been built. The bad news is that his proposal is mostly a political gesture. Both the House and the Senate are getting ready to debate their own multi-year transportation bills this week, neither of which comes close to the scope of Obama’s proposal.

As observers have come to expect by now, the Obama plan doesn’t really address the thorny question of how to fund such an ambitious agenda, as Deron Lovaas writes for the Natural Resources Defense Council’s Switchboard Blog:

This is a step in the wrong direction, something I criticized the House Republican Leadership for earlier today. The priorities laid out for DOT in the budget are laudable, but dodging the all-important revenue issue is fiscally irresponsible and disappointing.

Obama’s six-year plan starts off with $50 billion for “immediate transportation investments,” about half of which would go to highway and bridge repair, 30 percent to transit and rail, and the rest to aviation and border crossings. This “fix-it-now” approach had been the centerpiece of the president’s failed jobs plan last fall, but fell on deaf ears amid deficit reduction talks. Then, starting in 2013, the president suggests spending roughly $80 billion per year on transportation for six years:

• $305 billion for highways and $108 billion for transit, which improves the current 80-20 split to 75-25
• $47 billion for rail reinvestment, with a continued focus on intercity and high-speed passenger rail
• $3.4 billion (~$600 million/year) for National Infrastructure Investments, supporting discretionary grant programs like TIGER
• $3.0 billion ($500 million/year) for TIFIA, a fourfold increase over current levels but only half of what the House and Senate suggest per year
• Two new accounts added to the Highway (renamed Transportation) Trust Fund: Intermodal, for transit, and National Infrastructure Investments (see above)

If any of this sounds familiar, that might be because the President proposed a similar but even more beefed-up reauthorization proposal last year. In that proposal, which was larger by $100 billion, Obama had included $30 billion for a national infrastructure bank, and $5 billion per year for livability programs, neither of which is included in his current proposal.

Update: Asked about bike/ped funding at a conference call with reporters today, Transportation Secretary Ray LaHood pointed out that Obama’s proposal funds the Livable Communities program at $27 billion over six years.  (h/t Jesse Prentice-Dunn)

When the House Ways and Means Committee voted to divert all gas tax revenue away from transit projects, severing transit’s only dedicated source of federal funds, they were essentially throwing transit riders under the bus.

The Potomac & Rappahannock Transportation Commission, which operates bus and commuter rail lines in Virginia, would need to cut service and raise fares under the House's proposed changes to transit funding. Photo: PotomacLocal

While the House’s official stance is that their proposal still somehow guarantees funding for transit, it really does anything but. ”It’s not dedicated, it’s not stable, it’s not predictable… and it’s not clear where exactly that money is coming from,” said Francisca Porchas, lead coordinator for the advocacy organization Transit Riders for Public Transportation. “For regular bus riders, it’s going to mean completely pulling the rug out from under them.”

It’s not like mass transit has been flying high lately, either. Over the past three years, there’s been an onslaught of fare hikes, service cuts, and layoffs at American transit agencies, even as ridership hit record highs. Some 97,000 employees in the transit and ground transportation industry lost their jobs in 2009 alone.

Forcing transit to fight for funds from the general budget will also force transit agencies to make cuts immediately. Transit agencies like Virginia’s Potomac and Rappahannock Transportation Commission would likely need to cut service and raise fares just as a contingency, since federal funds make up some 15-20 percent of PRTC’s total budget, and state and local governments lack the wherewithal to step in if that money disappeared.

Furthermore, with their future funding in doubt, agencies will be forced to borrow money at higher interest rates, adding another level of costs to plans to add new capacity. That promises to bleed over into the basic services that agencies provide, making the trend of service cuts and fare hikes even worse.

“Where many transit agencies are trying to advance capital expansion, they are doing so instead of maintaining current service,” Porchas explained. “Transit agencies will be making some tough choices, and they’ll prioritize capacity expansion over operating and maintaining their system” if federal funding is suddenly threatened, she said.

The Senate Finance Committee is currently marking up what lawmakers have christened the “Highway Investment, Job Creation and Economic Growth Act of 2012,” the final component of the Senate’s two-year transportation bill. This portion of the bill, put together by committee chair Max Baucus (D-MT), is responsible for the “pay-for” — identifying approximately $13 billion in funding needed to align the bill’s spending with its revenue. As of yesterday the committee had announced only a little more than $10 billion in “found” revenue.

The Senate Finance Committee discusses how to fund their two-year transportation bill. Image: U.S. Senate

Today (very early in the morning, as his Republican colleagues pointed out), Baucus released an updated version of the bill, which incorporates several proposed amendments — including Senator Chuck Schumer’s transit benefits amendment, which would raise the maximum tax benefit for commuters who take transit so that it’s equal to the benefit for commuters who drive.

Baucus also revealed additional sources of funds and how they’d be used:

• $2.618 billion transferred from import tariff revenue (essentially a transfer from the general fund) would ensure the Highway Trust Fund would be fully-funded over the life of the bill
• $6.505 billion added to the general fund over ten years by closing various tax loopholes
• $0.710 billion in new spending over ten years, mostly in new tax breaks, including parity between the pre-tax commuter parking and transit benefits

The addition of transit commuter benefits is good but frustrating news for transit. While the Senate continues include a few forward thinking reforms on transit policy, the House bill’s extremist slant poses a threat to the entire reauthorization effort.

In remarks before the markup votes began, Republicans voiced their concerns about budget offsets that “do not have anything to do with transportation,” in the words of Richard Burr (R-NC). Tom Coburn (R-OK), Mike Enzi (R-WY) and Burr even expressed measured interest in indexing the federal gas tax to inflation.

On the Democrats’ side,  John Kerry (D-MA) reiterated his support for a national infrastructure bank capitalized by a $10 billion in federal investment. But Kerry indicated he would not attempt to insert the infrastructure bank into this bill.

The bill is expected to pass the Democrat-controlled committee; the big remaining question is whether it will pass with the same bipartisan support that the EPW and Banking segments of the transportation bill received.

A live webcast of the markup is available here.

The last piece of the Senate’s two-year transportation reauthorization proposal will be marked up by the Finance Committee tomorrow at 3:00 p.m. The committee was tasked with finding approximately $12 billion to bridge the projected shortfall of the Highway Trust Fund over the life of the bill. So far, according to a summary released by Chairman Max Baucus (D-MT), they have found a little over $10.4 billion:

Sen. Schumer had made restoring the pre-tax commuter transit benefit a priority in 2012. Photo: AP

• $3.7 billion transferred from the Leaking Underground Storage Tank Trust Fund, already funded by a slice of the federal gas tax
• $2.8 billion from reducing a tax credit on certain biofuels
• $2.5 billion from taxes on imported cars, redirected from the general fund to the HTF
• $0.7 billion from the “gas guzzler tax,” also redirected from the general fund
• $0.7 in back taxes collected after revoking passports of serious offenders, assuming offenders would rather pay the feds than lose their passport

Furthermore, Sen. Charles Schumer (D-NY) has sponsored an amendment that would restore parity between the pre-tax commuter benefits for transit and parking. There had been parity between transit and parking pre-tax benefits since the Stimulus Act was passed in 2009, but the transit benefit was slashed in half — from $230 a month to $125 — when the measure expired on January 1st. Schumer’s amendment would make the parity permanent.

Live updates will be available tomorrow on twitter (#TranspoMarkup).

Today at Grand Central Terminal in Manhattan, four members of New York’s congressional delegation joined the head of the Metropolitan Transportation Authority in decrying House GOP efforts to drastically alter how the federal government supports transit in cities.

Reps. Joe Crowley, Charlie Rangel, Jerry Nadler and Carolyn Maloney joined MTA chief Joe Lhota to decry the House Republicans' attempt to end dedicated federal funding for transit. Photo: Noah Kazis

Under the House’s plan, instead of receiving a roughly 20 percent cut of the federal gas tax, transit would receive a one-time transfer from the general fund. In theory, at least. In practice, there would be no guarantees that transit would receive any funding.

Noah Kazis, from our sister blog in New York, has more from today’s presser:

Charlie Rangel, former chair of the House Ways and Means Committee, which passed the anti-transit provision, said he asked influential House Budget Committee chairman Paul Ryan where the money to pay for transit would come from in the general fund. “The answer was they did not know at that time,” said Rangel.

Other new rules that the speakers found objectionable would no longer require states to set aside an extra 1 percent of funds for transit in cities of over 200,000 residents, and would prohibit transit authorities that operate bus and rail services from receiving grants from the “bus and bus facilities fund.”

If the Transportation Research Board annual meeting were a music festival, the headline act would have been yesterday’s panel of six secretaries of transportation, including Ray LaHood (the incumbent) and Alan Boyd (the first to ever hold the post). As headliners go, they were a bit of a downer: They told a standing-room-only crowd that they’re all pretty worried about America’s ability to deliver the transportation policy the country needs.

By comparison, their opening act was a little more upbeat. Congressmen Bill Shuster, a Pennsylvania Republican and chairman of the Railroads Subcommittee in the House, and Earl Blumenauer, an Oregon Democrat and former member of the Transportation and Infrastructure Committee, held forth on ”The Future Federal Role in Transportation.” They demonstrated a little more reason for optimism than the secretaries did.

Rep. Earl Blumenauer (D-OR). Photo: ThinkProgress

For one thing, Shuster defended the explicit constitutional responsibilities of the federal government to provide for infrastructure. And when asked about transportation’s relationship to global trade, Shuster said, “When you’re talking about trade, you’re talking about transportation,” since goods need to be shipped from factory to port to overseas. “Sometimes, my party doesn’t link the two.” It was a display of nonpartisanship that hearkened back to the days when, in Blumenauer’s words, “Congress had three parties: Democrats, Republicans, and the T&I Committee.” (Bill Shuster’s father Bud chaired that committee from 1995 to 2001.)

But Shuster also opened his remarks with the announcement that his party’s five-year surface transportation bill would be unveiled on Friday. And, less than 12 hours removed from a State of the Union address that stressed an “all-out, all-of-the-above” energy policy, he was all too happy to suggest the inclusion of gas and oil drilling revenue to pay for it. Blumenauer, on the other hand, pointed out that oil and gas drilling doesn’t represent “anything near what’s necessary” to fund transportation spending at current levels, given the declining power of the gas tax. Blumenauer expressed his hope that “sometime in the coming decade, we can move away from the gas and diesel fuel tax, and to something more stable, fair, and efficient” in the form of a mileage-based fee system. Blumenauer’s home state of Oregon, which he pointed out was the first state to institute a gas tax dedicated to transportation funding, is in the midst of an experiment to implement VMT fees.

Read more…

At current rates, revenue from fuel taxes, which have traditionally funded America's national transportation programs, is projected to lag far behind transportation spending.

This week marks the Transportation Research Board’s 91st annual meeting, a time when thousands of experts and professionals from across the country descend on the nation’s capital to share their ideas, discoveries, theories, and fears with their colleagues in the transportation field. This year, falling in line with political rhetoric from both parties that ties transportation to job creation, the conference’s theme is “putting innovation and people to work.” Presumably, “innovation” refers in part to the fact that there is little to no agreement on how to pay for transportation investments at the federal level.

Roy Kienitz, former Under Secretary for Policy at U.S. DOT, has doubts about the future of maintaining a transportation system exclusively with fuel taxes, VMT fees, or other sources tied to how much people drive. Photo: TrafficTechnologyToday

At one session today, “Politically Acceptable Solutions to Pay for a Re-formed Federal Program,” the panel of experts proposed several ways to do so — and none directly involved expansion of offshore or Arctic drilling. Each speaker began with a nearly identical slide, showing lines for transportation spending and gas tax revenue growing farther and farther apart over time, accompanied by an explanation of how better gas mileage means less money for the Highway Trust Fund — the pool of money that has traditionally paid for the federal transportation program. Proceeding under the assumption that the federal gas tax will not be raised (a safe assumption, for now at least), the speakers proposed alternative strategies to fill that gap:

• Martin Wachs, a Berkeley professor and researcher at the RAND Corporation, described mileage-based user fees, where a GPS tracker measures the distance a car travels in a given year so they can be charged accordingly. Transportation is supposed to be paid by user fees, Wachs said, so this is a good match philosophically, but he added that it raises questions about privacy. Also, he said, the administrative costs of such a system would be incredibly high.
• David Burwell, director of the Carnegie Endowment for International Peace’s Energy and Climate Program, suggested combining the gas tax with an “upstream” fee on every barrel of oil imported and/or refined in the U.S. Naturally, this would run into opposition from the anti-tax crowd (not to mention the oil lobby).
• Rich Little, director of the Keston Institute for Infrastructure at USC, suggested that pension funds could be encouraged to invest in transportation projects. However, Little admitted, that’s just using tomorrow’s money today, and the government would still need to raise additional money tomorrow to pay the pension funds back.

The session’s final speaker, former Under Secretary of Transportation Roy Kienitz, told the packed audience at the Washington Hilton: “I’m here to be the dream crusher.”

Read more…

The U.S. makes up a small portion of the world's investment in PPPs, but elected officials here are expressing growing interest in them. Image: Brookings

When government types start to talk about expanding infrastructure, you’re likely to hear the phrase “public-private partnership” thrown around a lot. PPPs (or P3s, or 3Ps) are one of the “innovative financing tools” that policymakers love to hold up as a way to expedite expensive infrastructure projects that taxpayers want but aren’t willing to pay for – or that elected officials want to build but won’t take any political risks to support.

In one form of PPP, the government bundles several responsibilities — like the design, financing, construction, and maintenance of new infrastructure — into a single contract, and bids it out to a private company. Essentially, the company provides the infrastructure, and the government pays that company a service fee for each year of the contract, plus interest to repay construction costs.

When successful, a PPP lets government get more bang for its buck, but there are other kinds of PPP, too. One of those other variations, which some experts wouldn’t even consider a “true” PPP, involves taking some piece of publicly-built-and-paid-for infrastructure and leasing it out to a private company. Chicago did this with their parking system in 2008, and got burned, receiving far less from the contractor than the value of the meters would dictate. The main function of the PPP, in this case, was to “outsource to political will” to raise the price of on-street parking.

America is somewhat late to the table when it comes to PPPs, though the idea is gaining traction — and attracting criticism. While some, including President Obama, hope that PPPs are the ticket to infrastructure expansion in a public-spending-averse political climate, others see it as the kind of crony capitalism that made Solyndra a household name. Like Mitt Romney, for example (although, no surprise here, he has personally benefited from PPPs in the past).

Nevertheless, PPPs have managed to attract support from across the political spectrum. The conservative think tank The Heritage Foundation came out with a report this month that suggests:

“P3s have demonstrated the ability to raise substantial sums of money for major infrastructure projects, especially to add needed capacity in congested corridors.”

Compare that to a Brookings report [PDF] from last December:

Read more…