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Prospectus Blog Transportation Program Reform Facing an Uncertain Future

As we enter the new year–and celebrate the 21st year of publication of our newsletter–one thing is certain: the federal surface transportation program, as indeed the nation’s transportation future, remains in a state of flux.
What follows is a brief analysis that has led us to this conclusion. Shortly before the scheduled December 18 expiration of the third temporary extension of the federal surface transportation program, the House and the Senate passed yet another short-term extension, this time through the end of February 2010. Their action underscored once again the continued inability of the Congress to address the long-term transportation needs of the nation. Before adjourning for the holidays, the House also passed by a vote of 217 to 212 a second job stimulus bill (H.R. 2847). The $154 billion measure, endorsed by Rep. James Oberstar (D-MN) chairman of the House Transportation and Infrastructure (T&I) Committee, allocates $36.7 billion in additional funds for highways, transit and Amtrak, extends the surface transportation authorization through Sept. 30, 2010, credits the Highway Trust Fund with $19.5 billion in foregone interest payments and allows the HTF to accrue interest in the future. But because the new stimulus program and its infrastructure component are to be funded with dollars from the Troubled Assets Relief Program (TARP), the bill will face an uncertain future when it reaches the Senate early this year. Opponents may be expected to argue that the law establishing TARP requires unspent and repaid funds to be used to pay down the soaring national debt. The prospect of an impending vote to raise the debt ceiling might further discourage the Senate from redirecting the TARP money. The measure also faces possible White House opposition, given President Obama’s strong desire to limit further deficit spending and embark on a more sustainable fiscal policy.
Environmental advocacy groups, while supportive of the House measure, expressed disappointment that it failed to focus on long-term transportation reform or include a National Infrastructure Bank. Even Rep. John Mica (R-FL), ranking member of the House T&I Committee, who generally supports Chairman Oberstar, was moved to criticize the House bill. The “Son of Stimulus,” Mica wrote in Roll Call, will be no more successful in creating permanent new jobs in the transportation sector than was the first stimulus bill, since the dollars are being spent on short-term transportation enhancement and road repaving projects that provide jobs only for a few weeks or months. Our own impression, based on local evidence, tends to confirm Rep. Mica’s conclusions: the stimulus money has merely allowed local and state highway agencies and their contractors to avoid layoffs and enabled them to keep existing road crews working at full strength. This would be the likely effect of the second stimulus as well. Its effect on job creation (as opposed to job preservation) would be negligible according to many observers. In short, the latest House action is seen by the transportation community as another example of Congressional equivocation, extemporization and inability to come to grips with the nation’s long-range transportation needs in a fundamental way.

Is Anyone Listening Out There?
At the Transportation Policy and Finance Summit held by the International Bridge, Tunnel and Turnpike Association (IBTTA) on December 14-15, the sense of frustration with the legislative inertia was palpable. “Is anyone listening out there?” asked Steve Heminger, Executive Director of the Bay Area Metropolitan Transportation Commission and moderator of a panel session on the future of distance-based charging. His fellow panelists– Jack Schenendorf, Kathy Ruffalo and Emil Frankel, all of whom, like Heminger, served on commissions that recommended significant program reforms– agreed that there is no appetite in Congress to tackle long-term transportation reform. Nor is there the political will in either party to raise taxes, and the alternative — distance-based charging — raises a host of contentious issues that will need to be answered before Congress considers VMT fees as a serious financing option. How do we overcome this inertia, the panelists were asked. Their answers had a familiar ring: “The program has to be given a real sense of purpose…” “Congress must come up with a bold vision…” “There must be stronger leadership on Capitol Hill …” “People must be convinced that the money is wisely spent…” “We must inform and educate the public that doing nothing is not an option.” The luncheon speaker at the IBTTA conference, Felix Rohatyn, reinforced the sense of frustration. In his recently published book, Bold Endeavors, (Simon & Schuster, 2009) the highly respected former investment banker and longtime chairman of New York’s Municipal Assistance Corporation, issued an urgent call to action. “The Nation is falling apart– literally,” he warned. “America’s roads and bridges…– the country’s entire infrastructure– is rapidly and dangerously deteriorating,” he wrote. “America needs to rebuild its infrastructure. It is a critical national priority, a costly long-term investment, and a visionary enterprise.”
Public Perceptions
But the dilemma facing transportation advocates is that these warnings fall on deaf ears as far as the general public and many elected officials are concerned. People do not seem to share a sense of an impending crisis, nor are they alarmed about the deteriorating state of the infrastructure. Toll road operators attending the IBTTA meeting told us informally that their customer surveys show a high degree of satisfaction with the quality of service and the physical condition of their facilities. While we did not have a chance to pose the same question to directors of state DOTs, we suspect that they would give similar answers concerning state-operated facilities. Collapsing bridges are happily few and far between, and the focused attention that state and local highway agencies devote to repair and maintenance of their assets keeps signs of aging infrastructure largely hidden from view. To be sure, another aspect of transportation– traffic congestion– is highly visible and public dissatisfaction with it is well documented. But the driving public has grown skeptical that more money or program reform will bring effective congestion relief. Perhaps they have come to accept the truth of the oft-repeated refrain that “you cannot build your way out of traffic congestion.” What is more, traffic congestion leaves vast stretches of rural and small-town America (and their elected representatives in Congress) unaffected and unconcerned. Traffic congestion may be the source of great concern to many individual urban communities, but it is not perceived as a crisis warranting congressional intervention. We offer the above arguments not to deny the reality of the nation’s aging infrastructure nor to refute the need for action, but only to suggest that they provide a plausible explanation for why there has been no popular outcry about the stalled transportation authorization and no groundswell of public demand to reform the transportation program or undertake a massive new program of infrastructure modernization.
Facing an Uncertain Future
Absent a public sense of urgency, hopes for early enactment of major reforms in the transportation program are fading. The economic recession and the approaching midterm elections have placed on hold any plans for a fuel tax increase, and the political imperative to reduce the budget deficit and the public debt casts a shadow over any plans for ambitious new infrastructure investments. Proposals for novel sources of financing–such as a National Infrastructure Bank or a federal capital budget– meet with congressional disinterest or outright skepticism. And the public and most politicians, as we have noted earlier, seem unconcerned despite warnings by numerous advocacy groups and trade associations of dire consequences of inaction. Significantly, Transportation Secretary Ray LaHood did not include the reauthorization of the surface transportation legislation in his year-end resolution of goals to be achieved in 2010. Given the probable–some say near-certain–prospect of a congressional realignment next November, continued legislative inaction on transportation reform even beyond 2010 is a distinct possibility according to seasoned political observers. One of our readers, a respected transportation practitioner, shared with us his concerns about the uncertain future of transportation reform. While we do not fully subscribe to his pessimistic assessment, we believe his comments, reproduced in part below, reflect the mood of many others in the transportation community. “The only good news these days is Warren Buffett’s recent investment in BNSF [Burlington Northern Santa Fe Railway.] The private sector is perhaps the only solution we have since Washington and most state legislatures and their respective DOTs are stymied by the rigor mortis which has set in, in recent times, regarding pricing, taxing, and other innovative ways to restructure the nation’s transportation system…. I am skeptical the public sector has anything to offer but earmarks and squandered resources, while the overall transportation system remains under-funded and decaying. “We have come full circle whereby government regulation and its abrogation of fiscal responsibility have condemned our publicly-funded transportation system to a beggar role, diminishing its ability to serve the nation’s transportation needs. This is what happened to the freight railroad industry between 1887 and 1987. Now the freight railroads have the chance to regain their footing while the highway system is looking more and more like the failed railroads of the 1970s. … “Unfortunately, we are witnessing the passing of the American century where the inability of our leaders to lead is placing the nation in an eroding competitive position on the world’s diplomatic, military, and economic scenes. … The nation’s influence continues to decline. The fate of our nation’s transportation infrastructure is perhaps the most visible example of this decline since the steel industry left the nation in the 1970s and 1980s. “The prospects are indeed bleak except for Mr. Buffet’s eternal faith in the American economy. It is interesting which mode of transportation he decided to invest his money in — not highway and bridge PPPs but in basic freight railroads which remain a stalwart foundation for moving freight and perhaps, in the near future, increasing percentages of the nation’s commuters and intercity travelers.”
We understand the reasons for our reader’s somber perspective but we are more inclined to embrace Warren Buffet’s and Felix Rohatyn’s optimistic faith in America’s dynamism and spirit of continuing renewal. As Rohatyn points out in his book, America’s transportation history has been marked by a series of “bold endeavors”– Erie Canal and the transcontinental railroad in the 19th century, the Panama Canal, the Interstate Highway System and, we might add, the vast privately-funded electrical grids and telecommunication networks, in the 20th century. In the long run, we believe, this nation will emerge from its current state of apathy and resume its tradition of boldly investing in the country’s transportation infrastructure. It just will take something or someone to light the fuse.