Even though his health-care website is still in need of dire repair, President Obama was in the port of New Orleans earlier this month talking about repairing a much bigger problem: the nation’s aging highways, bridges and ports. Saying that 1 in 9 bridges are structurally deficient and more than 40 percent of major highways are congested, Obama repeated his call for major infrastructure investment, but it’s unclear how or if that will happen.
Announced during his State of the Union speechin February, Obama’s Fix-It-First program calls for $40 billion in spending on a backlog of urgent repairs and upgrades. That would follow $31 billion that went into infrastructure as part of the American Recovery and Reinvestment Act. But those sums are dwarfed by the $3.6 trillion in investment the American Society of Civil Engineers (ASCE) says is needed by 2020.
In its 2013 Report Card for America’s Infrastructure, released in March, the ASCE gave the nation a grade of D, with aviation, roads and transit getting D’s; and ports and rail a C and C, respectively. The overall grade was a slight improvement from D in 2009, but the group emphasized in a report that “America’s critical infrastructure—principally, its roads, bridges, drinking water systems, mass transit systems, schools, and systems for delivering energy—may soon fail to meet society’s needs.”
With its job-creation allure, infrastructure spending can command bipartisan support, but that doesn’t necessarily mean new funding is readily forthcoming. Dating to the interstate construction of the 1950s, the Highway Trust Fund finances highway and mass-transit investment with an 18.4-cent excise tax on gas and other fuels, but that hasn’t been raised in 20 years; due to inflation, the fund’s purchasing power is only about 62 percent of what it was.
“States’ efforts to compensate for inadequate federal financial transportation assistance with other sources of capital have grown and multiplied.”
-Kenneth Orski, Transportation consultant
“At this point, you have to buy a tankful of gas for the federal tax to add up to the equivalent of a latte at Starbucks. This is a major imposition on Americans,” said Robert Yaro, president of the Regional Plan Association, an NGO with an infrastructure-promotion arm called America 2050. “But people get it that unless we can increase the gas tax, there won’t be a trust fund or investments in highways and public transport in this country. And if it isn’t the gas tax, then something else has to go up.”
Calls for higher gas taxes have been coming from the U.S. Chamber of Commerce to former Transport Secretary Ray LaHood to a number of states that have raised or will raise local gas taxes. In April, however, a Gallup poll found that two-thirds of Americans would oppose a gas tax hike of up to 20 cents a gallon, even if the money were to go to improving roads and bridges and building more mass transit.
Resistance to raising the tax, along with lower revenues due to the fact that cars are becoming more fuel efficient and overall driving is decreasing, has left the fund in a state of chronic shortfall that requires emergency transfers from Congress—to the tune of $41 billion since 2008. The current bill, Moving Ahead for Progress in the 21st Century (MAP-21), is a two-year measure to September 2014. That deadline has generated headlines suggesting the fund will go broke by 2015. Will lawmakers come to the rescue again?
“When MAP-21 expires, nothing will happen, because Congress will almost certainly pass an extension of the law. This is likely to be followed by numerous other extensions until a new multiyear law can be passed,” said Joshua Schank, president of the Eno Center for Transportation, a nonprofit policy foundation.
A raft of alternative funding proposals for infrastructure from various groups includes everything from more tolls, gasoline sales taxes or a fee on vehicle miles traveled (VMT), which would ensure revenue regardless of fuel efficiency. VMT fees would be calculated through black boxes in cars that track distance, and the proposal has gotten traction in states such as Oregon, California, and Nevada but faces opposition from privacy advocates. While states and cities experiment with GPS and non-GPS VMT boxes, infrastructure still needs solid funding solutions.
“The only way we are going to improve our infrastructure grade is if we make better investment and operational decisions with the funds we have,” said Schank. “While it is important to have more money because the needs are so great, there is also no doubt that we spend too much of our existing funds on shiny new projects in places with insufficient demand and not enough on maintaining and improving what we have in the places with some of the greatest need.”
Even if patchwork funding continues amid congressional dithering, some states are taking more transportation infrastructure into their own hands by financing it with long-term debt. For instance, New York is replacing the overcapacity 1955 Tappan Zee Bridge spanning the Hudson River with a 100-year, $4 billion New NY Bridge structure that will be paid for with $2.4 billion in debt issued by the New York Thruway Authority, as well as a $1.6 billion federal loan. Construction is expected to be complete in 2018.
“States’ efforts to compensate for inadequate federal financial transportation assistance with other sources of capital have grown and multiplied,” said Kenneth Orski, a transportation consultant who served in the precursor to the Federal Transit Administration. “In the longer run, greater state fiscal autonomy and financial sophistication could modify the federal-state relationship in transportation in a permanent way. There would be less need for direct federal financial aid to state DOTs and more emphasis on credit assistance to support transportation investments of truly national scope and significance.”
—By Tim Hornyak, Special to CNBC.com