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DOT calls on Congress for $20 billion to keep surface transportation funded through March 2011
Thursday, 02 July 2009 00:00

WASHINGTON—At a time when funding for surface transportation programs is scarce, the Obama administration released a plan to keep programs in the black until March 2011, according to various media reports.

The main takeaways of the plan include a request to take $20 billion in revenue from the United States General Treasury Fund into a federal trust for highway and transit infrastructure projects, according to a Reuters report.

This news follows reports from last month indicating that the Highway Trust Fund (HTF) is again on the verge of insolvency and will require up to $7 billion to remain fully funded through 2009.
The HTF is the federal government’s primary source for financing highway, bridge, and transit projects, and it is largely funded by the motor fuel federal tax, which is 18.4 cents per gallon for gasoline and 24.4 cents for diesel and has not been raised since 1993. One main reason for the HTF’s dwindling financial resources is that Americans are driving fewer miles, as evidenced by Americans driving 90 million fewer miles year-over-year in fiscal 2008.

In mid-June, Department of Transportation Secretary Ray LaHood called on Congress to propose an immediate 18-month highway reauthorization bill that would replenish the HTF. He said at this time that if this does not happen the HTF could be out of capital by the end of next month, with states facing the prospect of losing key transportation funding.

This news comes on the heels of the recent release of a six-year surface transportation bill introduced by House Transportation and Infrastructure Committee Chairman James L. Oberstar (D-Minn.) that will likely cost $450-$500 billion. The current bill—SAFETEA-LU—expires on September 30. A main theme of Oberstar’s bill calls for a national transportation policy, as opposed to DOT’s current policies, which were established and are administered by separate DOT departments—each focusing on a single mode of transportation.

Oberstar’s plan, which includes multiple freight-focused components, was approved in a House
subcommittee last week. And he has said that he opposes the plan for an 18-month extension of the existing bill.

Along with the request for $20 billion, the Obama plan also calls for $300 million to help states and metropolitan planning organizations evaluate their transportation systems, and provide $10 million to help DOT develop performance goals and establish guidelines for states and localities on project evaluation, according to a report from CQ Politics.

Also included was Obama’s plan for a national infrastructure bank. When he was running for President last year, Obama said this effort would invest $60 billion over a 10-year period for highways, technology, and related projects. And in this week’s release, Reuters reported it would be an independent entity within the DOT and focus on rail, highway, bridge, and waterway projects, as well as energy, water, and telecommunications infrastructure in the future. And Obama is asking for a combined $7 billion over the next two years to establish the bank that would give grants and make loans for projects that cross state lines or combine different transportation modes, added the report.

Regardless of the timeframe for surface transportation initiatives, where the funding will come from looms large.

“The major point here is to come up with a way to reach that funding target,” said Payson Peabody, of counsel, at Washington, D.C.-based law firm Dykema Gossett PLLC. “[A] short-term fix is not necessarily going to solve the short-term problems we have.

Peabody added that in the current fiscal environment, the additional spending proposed by Chairman Oberstar must be paid for. And he explained there are really only two choices: a broad-based tax increase; or tolling and expanded use of public private partnerships.

Direct user fees to pay for new infrastructure will allow leveraging of private capital to help pay for
transportation investment, said Peabody, and it will reduce budget costs and make each project
accountable to investors as well as to voters.

Direct user fees to pay for new infrastructure will allow leveraging of private capital to help pay for
transportation investment, said Peabody, and it will reduce budget costs and make each project
accountable to investors as well as to voters.

“The 18-month proposal is encouraging, because it does not contain the anti user-fee and anti publicprivate partnership provisions in the Oberstar bill, said Peabody.

Peabody also noted that a recent report from the Energy Information Administration indicated that
domestic fuel consumption has gone down to 2000 levels, which he said suggest a structural problem with how the HTF is funded.

Logistics Management, 7/2/2009