All indications are that the Trump administration’s infrastructure proposals will be issued in early 2018, following completion of the major tax reform bill. NASSTRAC, along with other shipper and carrier groups, plans to participate actively on infrastructure, in an effort to maximize investment in the maintenance and improvement of highways, roads and bridges, as well as other elements of the national transportation system.
In this post, I will cover the key issues on the infrastructure front and provide a preview of some likely components of what the Trump administration and Congress will soon be working on. In my next post, I plan to follow up with a more detailed discussion of the relevant parts of the legislative package and of efforts to help meet the needs of freight transportation and supply chains.
In a word, the problem we face is underinvestment. Everyone recognizes this fact, but remedial action has been elusive for decades. Since 1993, the federal fuel tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel has not been raised at all, or indexed for inflation, despite increases in roadway miles, freight volumes and passenger traffic. The purchasing power of the Highway Trust Fund, which is supported by those taxes, has therefore fallen significantly. This has led to crumbling streets and highways, structurally deficient bridges, and congestion that makes shipments slower and delivery times less reliable. A recent World Bank study of 50 countries found that the United States will have the largest unmet infrastructure needs in the coming decades.
Some states, including Virginia and Maryland (both bordering D.C.) and California, have done better. The average fuel tax for states is almost a nickel a gallon higher for diesel and almost a dime a gallon higher for gasoline than federal levels. However, state fuel tax revenues do not go to the Highway Trust Fund, but are used in the states that collect them.
There are ways other than fuel taxes to keep the Highway Trust Fund from running out of money, though experts agree that higher fuel taxes, indexed for inflation, are the most efficient approach. Money can be collected from tolls, but tolls are even less popular than fuel taxes, particularly when charged on roads that were built and paid for long ago.
There have been periodic highway bills, including ISTEA (1991), TEA-21 (1998), SAFETEA-LU (2005), MAP-21 (2012) and, most recently, the FAST Act (2015), in which Congress came up with other funding for the Highway Trust Fund. These bills also deserve our attention because Congress uses them to make changes in laws relevant to transportation and regulation. The recent bills streamlined the permitting process for roads and bridges, and an issue in the next highway bill will certainly call for permitting twin 33-foot trailers, which NASSTRAC supports.
The problem with such bills as ways to find money (mostly taken from other programs) for the Highway Trust Fund is that highway infrastructure investment works best when there is a steady, reliable stream of funding that can be counted on during the planning and implementation of major multi-year highway (and other) projects. With funding dependent on ad-hoc methods in highway bills, many of which were not completed for a year or more after the previous bill expired and may have involved 20 or 30 last-minute extensions, project managers are forced to scramble to keep projects going. The resulting delays and uncertainty adds to the complexity and existing costs. Moreover, the amounts of funding Congress has provided are not enough to meet national needs.
When the Trump administration took office, it announced plans for $1 trillion in infrastructure spending over 10 years that would create new jobs and shore up critical infrastructure. Since then, President Trump has spoken about infrastructure on many occasions and has even expressed interest in boosting fuel taxes. However, problems remain. Though first presented as an early initiative, infrastructure has been delayed as the focus in Washington shifted from Obamacare to immigration to avoiding government shutdowns and pursuing tax reform.
In addition, the old controversies about how much funding to provide and how to pay for it have not gone away. Infrastructure investment generally enjoys bipartisan support, because of its importance for the national economy and our quality of life. However, Republicans are reluctant to raise any taxes, even on fuel to fund highway construction and maintenance, and some Democrats share their aversion to fuel tax increases and indexing.
Early reports suggested that the Trump administration would look to private investment, including public-private partnerships, to produce 80 percent of the $1 trillion in funding. But this approach also has problems. Where investment-grade projects exist, they tend to involve high-density turnpikes in the Northeast or on the West Coast, as well as some loss of governmental control.
Investors might be willing, for example, to buy a turnpike, looking to years of toll revenues for their returns, but they would want to preclude interference by, and competition with, state highway departments and other highway projects. For its part, the state might take the proceeds of the turnpike sale and use the money for non-highway purposes — health care, education, paying pensions, etc. This can be defended, but it represents a change from the traditional practice of states collecting turnpike toll revenues and using them to fund roadway maintenance and improvement.
In addition, rural states might not benefit at all, since low traffic densities over long distances may not appeal to private investors. Notably, the current chairman of the Senate Environment and Public Works Committee, which will be a major player in infrastructure issues, is Sen. John Barrasso of Wyoming. Wyoming is in the top ten in terms of square miles, but comes in place 50 in terms of population (Washington D.C. has more people). States like Wyoming also need infrastructure investment, but attracting investors based on tolled turnpikes isn’t likely to work.
There has also been talk recently of shifting more burdens to states (not a popular idea with most state governors, who struggle to meet their own financial burdens and often cannot run deficits). Or federal support might be tied to states’ own infrastructure programs, so that the more a state spends, the more funding it gets from Washington. But many in Congress have misgivings because the results may not reflect national needs. In addition, if the new tax reform bill adds to the national debt, spending on infrastructure needs may be cut back, exacerbating the poor condition of highways, bridges, ports, etc., at a time when the economy requires more infrastructure spending.
These issues are not easy to resolve, even among members of Congress and administration officials who share a good-faith desire for new and better solutions to old but important problems. It looks like 2018 will bring major challenges and opportunities on the infrastructure front.
About the Author
John Cutler has been an attorney specializing in transportation law for over 40 years. Based in Washington, DC, he has been General Counsel of NASSTRAC for almost 20 years, speaking and writing frequently about legal, regulatory and legislative issues affecting transportation and logistics.