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Transportation News Bulletins - LTL and TL

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Banking on Infrastructure
Monday, 13 July 2009 00:00

How would a national infrastructure bank work? The answer may be found in state programs.

In 2006, the Army’s 1st Infantry Division came home from Germany to settle at Fort Riley, Kan. The redeployment touched off a building boom in neighboring communities as developers constructed subdivisions to house soldiers and their families.

Communities were hard-pressed to keep pace with public infrastructure, so they turned to the state’s Transportation Revolving Fund for loans to build new streets.

“This is an extremely useful tool for smaller communities and counties to facilitate highway projects,” said Reed Davis, a financial economist for the Kansas Department of Transportation. “We loan the money to communities, and we provide a minimal subsidy of the interest they pay. Given Kansas’s size, it’s been a very popular program, and I think it’s been very successful for the communities that have used it.”

The fund is the state’s infrastructure bank, by another name. Kansas law prohibits the state government from establishing a “bank.” It’s the kind of institution that’s gaining popularity inside the Beltway as a way of tapping new investment sources for repairing and building transportation infrastructure.

The Obama administration and Rep. James L. Oberstar, D-Minn., have clashed over the timing of a new surface transportation bill, but an infrastructure bank is a prominent part of the vision of the future of transportation finance on both sides of the issue.

Oberstar, chairman of the House Transportation and Infrastructure Committee, is pushing the Surface Transportation Authorization Act of 2009. The bill includes an infrastructure bank to provide grants, loans, loan guarantees, lines of credit, private activity bonds, tax-credit bonds and other financial tools to states for highway, rail, transit projects and projects of national significance.

On July 1, the administration presented Congress with what it would like the infrastructure bank to be, an institution to “fund relatively large and transformative projects currently underfunded by the allocation process.”

The scope is wide, encompassing water, energy and telecommunications, as well as transportation. The bank would offer a combination of grants and credit products such as direct loans and loan guarantees that are most appropriate to the project at hand.

The idea is not new. In 1998, the Transportation Equity Act for the 21st Century authorized a pilot program for state infrastructure banks. In August 2007, Sens. Chris Dodd, D-Conn., and Chuck Hagel, R-Neb., introduced a bill for a national infrastructure bank that would identify, evaluate and help finance infrastructure projects of regional and national significance.

Kansas created its fund in 1999, but it was not until 2004 that the state capitalized it with $25 million from its $500 million transportation budget. Using state money meant all federal money Kansas receives could be dedicated to interstate and state highway projects.

According to the American Association of State Highway and Transportation officials, 35 states have infrastructure banks. Kansas and Georgia are the only states relying solely on state funds to capitalize the programs. The others draw all or part from federal sources.

Bruce Burditt, the Kansas DOT’s chief of financial investment management, said the revolving fund underwrites loans for communities too small to be rated by a national rating service. The first borrower was a county that wanted to resurface its road system.

In fact, the revolving fund provides for projects that wouldn’t be eligible for federal funding to begin with.

The state has issued nearly $89 million in bonds, Burditt said. To ease the pain for local governments, the state charges approximately 3.8 percent interest, some two points below the rate the state pays on its bonds. The fund has about reached its limits, and state Transportation Secretary Deb Miller is considering a new infusion of capital.

Burditt said the state’s fund has been successful because it allows flexibility in the amount that communities borrow, and that communities tailor their own repayment schedule—as long as payment is no longer than the lifespan of the project. To protect lenders against defaults, the state will pay lenders the community’s share of motor fuel tax receipts.

There is one downside, Burditt said: The state Legislature created the fund just for highways and bridges. Railroads and waterways could have benefited as well.

Reed said he would avoid giving infrastructure a dedicated source of revenue. “I would keep it on an as-needed basis,” he said. “If the revenue from a dedicated funding source exceeds your needs, then you get pressure to use it where maybe it’s not the most effective.”

Journal of Commerce, 7/13/2009

Credit Activity Showing Positive Signs, Say Daimler, Navistar Finance Units
Monday, 13 July 2009 00:00

Truck finance executives said recent credit activity indicates financial improvement in trucking, although they saw no signs of a truck sales recovery, while separately, market researcher R.L. Polk & Co. said new truck registrations are likely to hit bottom this year.

Executives with the captive financing arms of Daimler Trucks North America and Navistar International Corp. cited increases in requests for credit and decreases in account delinquencies as omens that could be leading to improvements in sales, they said in separate interviews recently.

“We’ve seen some fundamental improvements since the winter, but it will still be a challenge out there,” Richard Howard, a vice president of Daimler Truck Financial, told Transport Topics. “We don’t see a full recovery, but [the economy] is moving in the right direction.”

Meanwhile, Polk, Southfield, Mich., in a July 6 report, said new heavy-medium vehicle registrations will grow by an average of just 0.3% a year from 2009 to 2013.

Polk’s report on the Future of the U.S. Commercial Vehicle Market looked at the truck market in two categories, Classes 6-8 and Classes 3-5.

Polk predicted that over the 2009-2013 period, new registrations for the light-medium group will increase 3.1% a year. Polk said Class 3 vehicles have replaced Class 8 heavy-duty trucks as the most frequently registered truck size on an annual basis.

Daimler’s Howard said there has been an increase in requests for pricing that he believes is a precursor to actual purchases. Order levels are still low, he said, but the trend was no longer declining. In North America, Daimler manufactures Freightliner and Western Star heavy-duty trucks.

Another sign, he said, is that Daimler has seen loan delinquency rates improve, dropping to 4% from 6%.

“Larger fleets are in relatively good shape,” he said. “They have positive cash flow. They are staying close to customers. We’re not out of the woods, but we expect an uptick in performance by the end of the year.”

Trish Reed, vice president of business operations for Navistar Financial Corp., agreed with her Daimler competitor and said she has also seen small signs for optimism.

“When we look at credit applications for the full month of May, we have seen an increase compared to last May, a small uptick of 5% to 8%,” Reed told TT.

“We’ve also seen an improvement in our 60-days-past-due accounts, which have been really strong as our customers are going through the challenges of this recession, and that is also a good signal,” Reed said. Navistar manufactures International-brand trucks.

Representatives of the captive financial arms of other truck-making corporations—Paccar Financial and Volvo Financial Services—declined to comment on current conditions.

Reed said Navistar Financial executives have noticed that new truck customers who normally arranged their own financing, such as large fleets, have been requesting more credit through Navistar since the recession began. The company was able to accommodate many of the requests without lowering its approval standards, she said.

“Navistar and its predecessors have been operating our captive financing arm through all of the ups and downs of the market for more than 60 years,” Reed said. “Banks may have stricter credit criteria than we do, but that’s because we understand what is going on. We don’t get rattled whether the economy is going into an upturn or downturn.”

In its most recent fiscal year ended Oct. 31, Navistar financed 6,600 new U.S. vehicles, 3,100 of them Class 8 trucks, Reed said.

Daimler’s Howard agreed on the proportional increase for finance captives.

“We started what was then called Freightliner Financial in 1974, which also was a challenging economic environment,” Howard said. “We like to think of ourselves as being steadfast business partners in both thick and thin, but during thin times like now is when we really define ourselves.”

He said that the division’s goal from the beginning was to be the first financing choice for buyers of Daimler’s various brands.

“We have achieved that, financing 85% of their sales, for both fleets and owner-operators,” Howard said. “We have 26,000 customers on our books today.”

Steven Goodall, vice president for credit and national accounts for Daimler Financial, said that “there’s still not a big appetite for new trucks out there.”

“What we’re mostly doing is helping fleets manage their business,” Goodall said. “They are maintaining their fleets, and they are seeing some very healthful signs out there.”

“It’s owner-operators where we’re still seeing a lot of pressure, a lot of cost cutting pressure,” Goodall said. “The rate cutting for freight hits them the most.”

Goodall said that before the recession, 70% of the trucks that Daimler financed in-house for owner-operators were for new vehicles.

“Today, that is reversed, to where 70% of the owner-operator vehicles we’re financing are for used trucks and only 30% new.”

Transport Topics, 7/13/2009

Senate global warming debate starts with frosty divide
Friday, 10 July 2009 00:00

Last month the U.S. House of Representatives approved the nation’s first cap-and-trade law after barely a day of floor discussion. In the Senate, however, the proposed law appears to face a tougher battle.

The Senate committee on Environment and Public Works held a hearing on Tuesday, July 7 on global warming and legislative tools.

OOIDA opposes the House’s cap and trade proposal, and the Association has asked its near 160,000 members to contact their representatives about that measure, which would create an emissions credits system for many businesses and allow buying and selling of credits in an open market.

According to OOIDA’s Washington, DC, office, the July 7 hearing showcased the continued divide about climate change between the two parties in the Senate.

Sens. Barbara Boxer, D-CA, who chairs the environment and public works committee, and James Inhofe, R-OK, the ranking Republican, each made strong statements during the hearing.

“I expect you will hear fierce words of doubt and fear and worse from the other side of the aisle,” Boxer said in her opening statement. “This is consistent with a pattern of “No, we can’t.”

Inhofe countered quickly in his opening statement.

“I would note that the Senate has voted on cap and trade three times: in 2003, in 2005 and in 2008,” Inhofe said. “In each and every instance, we defeated it. Now, Madame Chairman, here we go again.”

Mike Joyce, OOIDA director of legislative affairs, monitored Tuesday’s hearing and spoke with Land Line Now Host Mark Reddig on Thursday about the proposed cap-and-trade legislation.

Joyce said the House’s cap-and-trade plan would add heavy costs to important trucking-related businesses, including diesel makers.

“Those sorts of penalties that will be placed on the oil companies quite simply will drive up the price of refined oil products, including diesel fuel,” Joyce said. “Most likely, that price will be passed on to the end consumer, the trucker that’s filling up their tank.”

On Thursday, Boxer said she’ll put off a vote from the EPW committee on the climate initiative until fall.

Senate Majority Leader Harry Reid, D-NV, has set a Sept. 28 deadline for the six Senate committees working on the climate bill to finish work on the committee level, and President Obama would like global warming legislation wrapped up before he departs for a December climate summit in Copenhagen, Joyce said.

Joyce pointed out, however, that once the Senate passes such a bill, both chambers of congress have several more steps of approval before it would be presented to the White House for signature.

A busy congressional schedule interrupted by an August recess will leave plenty of work for any climate change tool to be approved, Joyce said. Though the Senate has 58 Democrats and two Independent senators who caucus with Democrats, the bill’s estimated costs per household will be unpopular during the current economic recession.

“Health care is number one, climate change is number two, and they’re going to have to twist a lot of arms to get something through,” Joyce said.

To make sure their voices are heard, Joyce urged OOIDA members to call their two state senators about the climate change issue.

“I would encourage all of our members who don’t really like what they’re hearing about this bill to reach out between now and Labor Day and talk with their senators,” Joyce said. “Find out where they’re going to be and express their opinions about this legislation.”

The U.S. Capital Switchboard can be reached at 202-224-3121.

Land Line Magazine, 7/10/2009

Fuel surcharge policy for DOD loads nears final OK
Friday, 10 July 2009 00:00

Most truckers recall that the Department of Defense authorization bill signed into law nine months ago included an amendment calling for the full pass-through of fuel surcharges for all of DOD’s military shipments. OOIDA worked closely with lawmakers on the development of this amendment, a measure that was sponsored and championed by U.S. Peter DeFazio, D-OR.

OOIDA also worked with U.S. Rep. Ike Skelton, D-MO, and U.S. Sen. Duncan Hunter, R-CA, who were the chairman and ranking member of the Armed Services Committee and who supported the measure.

OOIDA Director of Government Affairs Rod Nofziger says the process is coming to a close, which takes that law from being a piece of paper with a presidential signature to full operational reality.

In November 2008, the interim rule was incorporated into DOD policy and in January 2009 it was approved by the department’s regulations council. The rule in its final form was subject to review by the Office of Management and Budget and the Office of Information and Regulatory Affairs Policy. That’s where it is now.

Nofziger says once they approve the language, it will be published in the Federal Register as an interim rule and could become effective sometime this month.

OOIDA Executive Vice-President Todd Spencer called the mandatory provision a “big shot in the arm for truckers who haul military shipments.”

Spencer said it was also a testament to how advocacy works and the effectiveness of OOIDA’s Washington, DC, lobbyists.

Does OOIDA see getting the pass-through into law for those military shipments as a big step in getting it mandated for all trucking transactions?

“We think the full pass-through of fuel surcharges is just good business ethics,” said Spencer. “It should be the norm rather than the exception.”

Land Line Magazine, 7/10/2009

Freight index falls to 12-year low
Friday, 10 July 2009 00:00

The Freight Transportation Services Index fell 0.6 percent in May from its April level, declining for the third consecutive month to the lowest level in 12 years, the U.S. Department of Transportation's Bureau of Transportation Statistics reported yesterday, July 9. However, the May decline was the smallest of the three consecutive decreases.

BTS, a part of the Research and Innovative Technology Administration, reported the May decrease was the ninth decline in the Freight TSI in the last 10 months, and that the index has declined 14.8 percent in that 10-month period. The May Freight TSI of 94.0 is the lowest level since June 1997 when it was 92.4.

The Freight TSI is down 16.7 percent from its historic peak of 112.9 reached in May 2006. The 6.3 percent decline in the first five months of 2009 was the largest in the last decade, exceeding the 5.3 percent decline for the first five months of 2000.

The 14.8 percent decline in the Freight TSI from May 2008 to May 2009 was the largest May-to-May decline in the 20 years for which the TSI is calculated. The freight index is also down 14.6 percent in the five years from May 2004, the sixth consecutive month in which the index declined for a five-year period. The index is down 8.4 percent in 10 years for the fifth-ever and the largest 10-year decline in the 20-year history of TSI data; all five of these 10-year declines took place in first five months of 2009.

The Freight TSI measures the month-to-month changes in the output of services provided by the for-hire freight transportation industries, including trucking, rail, inland waterways, pipelines and air freight. It includes historic data from 1990 to the present. The baseline year is 2000., 7/10/2009

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