infrastructure bank Archives - Transportation For America

Obama budget cues start of serious negotiations over transportation funding

With the release of his budget proposal yesterday, President Obama at last offered some specifics on his plan to use the repatriation of taxable corporate profits to fund transportation. In doing so, he staked out a starting point for real-world negotiations over a possible six-year transportation bill – the first time such a prospect has seemed remotely realistic in six years.

His gambit joins a burgeoning set of transportation funding proposals in Congress (more about these later in this post), another hopeful sign that lawmakers are taking the issue seriously.

The less good news, of course, is that those negotiations over tax reform and transportation funding – to say nothing of policy – are almost certain to last beyond the May 31 expiration of the current law, MAP-21. That means another extension and lingering uncertainty until this can be wrestled to the ground.

With the addition of revenues from taxing American profits parked overseas, the Obama budget looks to invest $94.7 billion in fiscal 2016, nearly double today’s level of just over $50 billion. Invested along the lines of his GROW America Act, this would represent a 25 percent increase for the highway program and more than 70 percent for transit, which today is wildly oversubscribed.

All told, the Obama plan would authorize $478 billion for a six-year program of investment, $176 billion over the levels of MAP-21, and $76 billion more than the four-year version of GROW America released last spring. About $240 billion of that is from expected gas tax revenue. Placing a mandatory 14 percent tax on roughly $2 trillion in earnings held abroad by U.S. multinationals would yield about $238 billion, the Administration estimates.

The plan would make the TIGER grant program a permanent feature, funded at $1.25 billion a year, and would continue funding planning grants for planning walkable neighborhoods around transit stops. It also would establish passenger rail and multimodal accounts within the former Highway Trust Fund (HTF), now reconstituted as the Transportation Trust Fund. It would create a multimodal freight program, funded at $1 billion in 2016, and continue to promote the accelerated, inter-agency reviews to get projects moving faster.

While Republicans criticized many features of the Administration budget, the notion of using corporate tax reform to fund transportation seems to have growing bipartisan support, as support for raising the gas tax struggles to take hold.

Last week, the unlikely pairing of Sens. Rand Paul (R-KY) and Barbara Boxer (D-CA) announced they would introduce the “Invest in Transportation Act”, a plan to offer an enticement tax rate of 6.5 percent on corporate earnings returned to the U.S. from abroad, with all proceeds going to the Highway Trust Fund. Because it is voluntary, the exact amount is uncertain, but the senators have said they hope it can make up for flat or declining gas tax revenues.

On the House side, Reps. John Delaney (D-MD) and Richard Hanna (R-NY) have introduced the Infrastructure 2.0 Act, (HR 625), under which existing overseas profits would be subject to a mandatory, one-time 8.75 percent tax. This is expected to yield $120 billion, sending enough of that to the Highway Trust Fund to cover the gap between anticipated gas tax in-take and spending at current levels plus modest growth.

The bill also directs $50 billion of the $120 billion to capitalize an infrastructure bank called the American Infrastructure Fund (AIF) that could provide financing to transportation, energy, communications, water and education projects. Rep. Delaney establishes an AIF in another bill submitted last year along with Rep. Mike Fitzpatrick (R-PA), who reintroduced their “Partnership to Build America Act” (HR 413) on Jan 20. State and local government entities, nonprofit infrastructure providers, private parties, and public-private partnerships all would be eligible to apply for AIF financing. Through bond sales, the fund would be leveraged at a 15:1 ratio to provide up to $750 billion in loans or guarantees.

Not everyone in Congress has given up on the bird-in-the-hand funding source – the gas tax. Rep. Earl Blumenauer (D-OR), is set to reintroduce his UPDATE Act, which would hike the per-gallon tax by 15 cents, with 5 cent increases unfolding over the next three years, and index the overall tax to inflation. In the Senate, Senator Tom Carper (D-DE) is working with a bipartisan group to introduce a gas-tax bill, expected later this month.

Although more of an aspirational bill than a funding measure, Senator Bernie Sanders (I-VT) last week introduced his Rebuild America Act. Designed to illustrate the scale of investment the senator says we need, it calls for providing an additional $1 trillion in infrastructure investments over the next five years for roads, bridges and transit, passenger rail, airports, water infrastructure, marine ports and inland waterways, national parks infrastructure, and broadband and electrical grid upgrades.

It would add $735 billion to surface transportation investments over the next 8 years, with an additional $75 billion a year for the HTF. It also would capitalize a National Infrastructure Bank with $5 billion per year for fiscal 2015-19, estimated to stimulate more than $250 billion in investments. It provide for $2 billion more for TIFIA loans and $5 billion a year for TIGER.

And it makes all the other proposals look like skinflints in comparison.

At last, Congress and the White House appear to have moved transportation to a front-burner issue this year. With the Obama proposal as a strong starting place, here’s hoping negotiations proceed swiftly and in good faith so our communities can continue to plan, maintain and build for continued prosperity.

Kerry-Hutchison-Warner infrastructure bank would leverage private investment for revenue-generating projects

This month, a bipartisan group of U.S. Senators introduced a variation of the national infrastructure bank touted by President Obama.

The BUILD Act is sponsored by Senator John Kerry, the 2004 Democratic presidential nominee from Massachusetts; Texas Republican Kay Bailey Hutchison; and Virginia Democrat Mark Warner, a former governor with a history of prioritizing transportation infrastructure.

The infrastructure bank would start out with $10 billion, with the goal of generating private investment to match the federal commitment. Leveraging private capital is a recurring theme in discussions about transportation finance and a notable point of agreement between President Obama and House Transportation and Infrastructure Committee Chairman John Mica.

While the plan resembles what the President had proposed, the Kerry-Hutchison-Warner bill would only include loans, not grants. Only revenue-generating projects would be funded, a concession Kerry has said is necessary due to the current political appetite for less domestic spending. The bank would operate independently of the U.S. Department of Transportation.

In an enthusiastic endorsement of the proposal, the New York Times editorialized that the bank would allow officials with limited resources to pursue needed repairs.

By providing low-cost capital to states, cities and authorities, the bank would help these strapped governments kick-start projects that are now unaffordable, while attracting investments from pension and private-equity funds that are looking for stable money-generating ventures in which to invest.

The Times also put the proposal into a broader context, citing the very real possibility of future tragedy absent the proper maintenance, and the misplaced priorities of tax cuts over investment.

…already conservatives are railing against what some have called a “boondoggle,” a phrase used to demonize virtually any public investment. What will these opponents tell voters when the dams break and the bridges fall? Before more lives are lost, lawmakers should ask themselves whether they used their public office only to slash spending (and taxes for the wealthy), or to spend money wisely.

A recent Boston Globe op-ed authored by former Massachusetts homeland security adviser Juliette Kayyem also made a strong case for the bank, and Streetsblog covered the bill’s release here.

Photo courtesy of the Center for American Progress.

President Obama proposes $556 billion, six-year federal transportation program

President Obama released a budget for the 2012 fiscal year this morning that includes a significant investment in our nation’s infrastructure and a long-overdue emphasis on options and accountability.

The $556 billion, six-year proposal for transportation reauthorization included in the budget is an ambitious standout in a largely sober blueprint. However, persistent unemployment — particularly in the construction industry — makes the case for forgoing infrastructure cuts in favor of investment. When more Americans are working, paying taxes and putting their dollars back into their communities, the deficit goes down too.

Yonah Freemark from the Transport Politic pointed out that the President’s budget continues the expansion of transportation options.

Though the Administration would increase funding for roads construction from $41 billion in the previous budget to $70 billion, that increase is dwarfed in percentage by proposed spending on transit, which would more than double from $8 billion annually currently to $22 billion. Over six years, spending on capital improvements for public transportation would add up to $119 billion.

Tanya Snyder at Streetsblog Capitol Hill also offered some initial reactions.

As promised, the budget also includes the $53 billion for high-speed rail over six years previewed by Vice President Biden in a speech last week.

True to the overall theme of cuts coupled with smarter investment, the plan consolidates 55 programs into just five and invests $30 billion in a National Infrastructure Bank to provide loans and grants to projects of regional and national significance that promote economic growth. The plan contains no earmarks and cancels a number of them still on the books.

The administration is also highlighting a new $32 billion competitive grant program modeled after the successful Race to the Top program in the U.S. Department of Education. This new approach would create incentives for states and regions to pursue their own innovations that reduce congestion, improve quality of life, make it easier for residents to get to work and recreation and enhance economic prosperity. Details about that program should be forthcoming at the U.S. DOT briefing about the budget this afternoon.

In addition, a “Fix-it-first” policy for highways and transit grants would make repair and maintenance of existing infrastructure a higher priority, a reform that would save lives and save money.

The plan does not specify a revenue source for the increases but “commits to work with Congress to ensure that the funding increases for surface transportation do not increase the deficit.”

The U.S. Department of Transportation is hosting a briefing at 2pm at which point many of these details will be further illuminated. T4 America will be releasing a formal statement early this afternoon.

Photo: AFP/Getty Images

More infrastructure investment will create jobs, boost economy, according to Treasury Sec. Geithner

U.S. Treasury Secretary Tim Geithner hammered on the job-creation and economy-boosting effects of the Obama administration’s plan for infrastructure investment in a blog post on the department’s website.

Writing the same day Vice President Biden and Transportation Secretary Ray LaHood were in Philadelphia promoting a $53 billion, 6-year passenger rail package, Geithner argued that investing in our nation’s roads, bridges, rail and transit systems creates “both immediate and long-term economic benefits.”

Treasury Department analysis reveals an unemployment rate among American workers building infrastructure at 15 percent, significantly higher than the national average. Investing in infrastructure would create jobs in construction, manufacturing and retail trade, all sectors hard hit by the economic downturn, and nine out of ten jobs created would pay middle-class wages.

Geithner emphasized the administration’s commitment to spending federal dollars in a targeted and fiscally responsible way, writing: “our strategy is designed to make crucial investments in infrastructure while bringing our deficits down to sustainable levels.”

Simply increasing spending levels is unacceptable, Geither wrote, adding “we must also reform the ways in which we invest.” He continued:

Not all infrastructure investments are good investments, and too often we have seen transportation projects exemplify the worst of Washington – the bridges to nowhere that rightly make American taxpayers cringe. The President’s Budget recognizes this and will make some difficult choices, proposing significant spending cuts, including to some programs we would preserve in better times.

President Obama’s plan includes a National Infrastructure Bank, which would “select projects on the basis of rigorous analysis,” Geithner explained. The Bank would evaluate and fund projects that generate the best return on investment, leverage private capital to do it and promote increased transportation options along the way. House Transportation and Infrastructure Committee chairman John Mica, a key player in Congress, has cited securing private capital for projects as a key priority for federal transportation spending.

Infrastructure investment benefits all Americans, even in ways we do not always think about. Upgrades and additions to the New York City subway system allow millions to “get to work faster, increasing their productivity and quality of life by decreasing the amount of time lost to commuting,” Geithner notes. But it also means that “the far-away Kawasaki plant in Lincoln, Nebraska that manufactures the subway cars will increase production, putting Nebraskans to work.”

You can read Secretary Geithner’s entire post here.

Photo: Washington Post

President Obama: “I would like to see some long-term reforms in how transportation dollars flow…”

President Obama gave an interview to five columnists aboard Air Force One last week en route to Chicago, and he talked at length about infrastructure, transportation, and the need to make serious reforms in transportation spending this year when the five-year transportation bill is reauthorized. He hinted at how proper investments in transportation and infrastructure can help boost the economy and meet other national goals like reducing energy usage — all while making a downpayment on a 21st Century transportation system we’re all hoping for.

President Obama with his Transportation Secretary Ray LaHood. From the Obama-Biden Transition Project’s Flickr stream (Creative Commons)

An excerpt from the very long interview:

Q. Mr. President, if I could ask you about infrastructure, You’ve got infrastructure spending in the stimulus package. The need is much faster than that and the money is tight. Do you anticipate any significant further additions in federal infrastructure spending in the reasonably near future, and are you making plans to establish an infrastructure bank?

President Obama: Well, number one, we’ve got the transportation reauthorization bill that’s going to be coming up. So one thing to keep some perspective about on the recovery package is this is supposed to provide a jolt to the economy above and beyond what we’re doing already in the federal budget. And so I expect that Secretary LaHood, working with the various transportation committees are going to be moving forward on a transportation bill. I would like to see some long-term reforms in how transportation dollars flow, and I’ll give you just a couple of examples. I think right now we don’t do a lot of effective planning at the regional level when it comes to transportation. That’s hugely inefficient. Not only does it probably consume more money in terms of getting projects done, but it also ends up creating traffic patterns, for example, that are really hugely wasteful when it comes to energy use.

If we can start building in more incentives for more effective planning at the local level, that’s not just good transportation policy, it’s good energy policy. So we’ll be working with transportation committees to see if we can move in that direction.

The idea of an infrastructure bank I think make sense — the idea that we get engineers, and not just elected officials, involved in thinking about and planning how we’re spending these dollars. I may get some objections from my colleagues, Democrat and Republican, on the Hill about that, but I think there should be some way for us to — just think how can we rationalize the process to get the most bang for the buck, because the needs are massive and we can’t do everything, and if it’s estimated that just on infrastructure alone it would cost a couple trillion dollars to get our roads, bridges, sewer systems, et cetera, up to snuff, and we know we’re not going to have that money, then it would be nice if we said here are the 10 most important projects and let’s do those first, instead of maybe doing the 10 least important projects but the ones that have the most political pull.