Transportation For America » Full summary of The American Recovery and Reinvestment Act of 2009

Full summary of The American Recovery and Reinvestment Act of 2009

February 17, 2009
By Transportation for America

This is Transportation For America’s full summary of the provisions and funding requirements for transportation in The American Recovery and Reinvestment Act. Read our statement on the final passage of the Act from last Friday here.

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Surface Transportation Program

The conference agreement provides $27,500,000,000, instead of $30,000,000,000 as proposed by the House and $27,060,000,000 as proposed by the Senate.

50% of funds distributed to State DOTs by STP formula
50% of funds distributed to States under the FY08 obligation
State DOTs have 120 days to use the funds or lose them to other States, but they can petition DOT for a one-year extension.
30% of all State funds are suballocated to local areas, which are not subject to the use-it or lose-it redistribution requirements.
3% set aside for Transportation Enhancements.
There is no requirement to prioritize repair and maintenance; project selection priority is given to projects that can be completed within 3 years and are located in economically distressed areas.
- Flexibility provided to State DOTs to fund passenger and freight rail transportation and port infrastructure projects.
$60 million included as discretionary capital grants by USDOT for projects that can be completed in 2 years.
$40,000,000 included for DOT oversight and administration.

Passenger and Freight Rail Programs

The conference agreement provides:

$8,000,000,000 for high-speed rail corridors and intercity passenger rail service. Funds are allocated by DOT between the Capital Assistance to States program and a new High Speed Passenger Rail program.
Projects do not have to be in a state rail plan and there is a 100% federal share.
DOT will submit a strategic funding plan within 60 days and issue interim guidance covering grant terms, conditions and procedures within 120 days.
$1,300,000,000 for AMTRAK instead of $800,000,000 in the House and $850,000,000 in the Senate. Of the total funds, $450,000,000 is for capital grants for security improvements. No more than 60% of the remaining funds shall be spent for capital improvements on the Northeast Corridor.

Transit

The conference agreement provides:

$6,900,000,000 for transit capital projects instead of $8,400,000,000 proposed by the Senate and $7,500,000,000 proposed by the House.
- 80% allocated by FTA urbanized formula, 10% is FTA rural, and 10% is FTA growing states and high-density formula.
- Includes $100,000,000 (instead of the $200,000,000 proposed by the Senate) for discretionary grants to public transit agencies for capital investments that will assist in reducing the energy consumption or greenhouse gas emissions of their public transit agencies.
- Transit agencies have 180 days to use the funds or lose them to other States, but they can petition DOT for a one year extension.
$750,000,000 instead of $2,000,000,000 as proposed by the House for Rail Modernization and Repair
- Funds also have 180 day use-it or lose-it provisions.
$750,000,000 instead of $2,500,000,000 in House for New Starts and Small Starts projects that are? already in construction or are nearly ready to begin construction.
- Priority for projects already under construction or able to obligate within 150 days. The funds are available through Sept. 30, 2012.

Supplemental Discretionary Grants

$1,500,000,000 instead of $5,500,000,000 proposed by the Senate for projects with national, metropolitan, or regional significance.

Continues intermodal focus, noting interstate and bridge maintenance and repair, freight and passenger rail, intermodal ports, and new starts/small starts are specifically eligible.
Changes funding eligibility to include transit agencies directly.
Projects that require less than a 100% Federal share are prioritized.
DOT selection criteria will be published within 90 days; projects nominated within 180 days; and the winners selected within 1 year. Projects must be complete within 3 years.
The program includes $1.5 million for DOT administration and oversight.

Other key elements in the bill related to transportation:

Recovery Zone Bonds

Creates a new category of tax credit bonds for investment in economic recovery zones. Authorizes $10 billion in recovery zone economic development bonds and $15 billion in recovery zone facility bonds to be issued during 2009 and 2010. Each state would receive a share of the national allocation based on that state’s job losses in 2008 as a percentage of national job losses in 2008 (each state will receive a minimum allocation of these bonds) which will be sub-allocated to local municipalities. The funds may be spent to invest in infrastructure, job training, education, and economic development in areas within the boundaries of the State, city or county (as the case may be) that has significant poverty, unemployment or home foreclosures. This proposal is estimated to cost $5.371 billion over 10 years.

Modify Speed Requirement for High-Speed Rail Exempt Facility Bonds

Under current law, States are allowed to issue private activity bonds for high-speed rail facilities as long as the facility will transport passengers between metropolitan areas using vehicles that are reasonably expected to operate at speeds in excess of 150 miles per hour between scheduled stops. This provision would allow these bonds to be used to develop rail facilities that are used by trains that are capable of attaining speeds in excess of 150 miles per hour. This proposal is estimated to cost $288 million over 10 years.

Infrastructure Financing Tools – Tax Credit Bond Option for State and Local Governments (“Build America Bonds”)

The Federal government provides significant financial support to State and local governments through the federal tax exemption for interest on municipal bonds, which reduces the cash interest payments that a State or local government must make on its debt. Tax credit bonds differ from tax-exempt bonds in two principal ways: (1) interest paid on tax credit bonds is taxable; and (2) a portion of the interest paid on tax credit bonds takes the form of a Federal tax credit. The Federal tax credit offsets a portion of the cash interest payment that the State or local government would otherwise need to make on the borrowing. For 2009 and 2010, the bill would provide State and local governments with the option of issuing a tax credit bond instead of a tax-exempt governmental obligation bond. Because the market for tax credits is currently small given current economic conditions, the bill would allow the State or local government to elect to receive a direct payment from the Federal government equal to the subsidy that would have otherwise been delivered through the Federal tax credit for bonds. This proposal is estimated to cost $4.348 billion over 10 years.

Reinvestment in Renewable Energy – Parity for Transit Benefits

Current law provides a tax-free fringe benefit employers can provide to employees for transit and parking. Those benefits are set at different dollar amounts. This provision would equalize the tax-free benefit employers can provide for transit and parking. The proposal sets both the parking and transit benefits at $230 a month for 2009, indexes them equally for 2010, and clarifies that certain transit benefits apply to federal employees. This provision is estimated to cost $192 million over ten years.