President George W. Bush signed a $286.4-billion six-year highway and mass transit bill into law Aug. 10, ending approximately two years of contentious delay that impeded the nation’s long-range planning for transportation construction.
Bipartisan support was almost unanimous in Congress. The House adopted a conference committee agreement on the amount by a vote of 412-8. The Senate then approved the agreement by 91-4.
The bill signing ceremony was held at Caterpillar Inc.’s Wheeloaders and Excavators Div. facility in suburban Chicago, near Aurora, IL.
“It’s very appropriate that the president sign the bill here since it’s very common to find this type of equipment on transportation infrastructure projects like building roads and bridges,” said James Dugan, a Caterpillar spokesperson.
The Aurora facility employs more than 3,000 people, many of whom attended the ceremony.
The new act, which covers fiscal years from 2004 to 2009, represents a 38 percent increase in guaranteed spending authority and is expected to create many thousands of new construction jobs. It includes $227.6 billion (79.4 percent of the total) for highways and bridges, $52.6 billion (18.4 percent of the total) for public transit projects and $6.3 billion (2.2 percent) for safety programs.
Promising each state at least a 19 percent increase in funding over the previous 1998-2003 highway act, the bill also raises the minimum rate of return that states receive from their contributions to the Highway Trust Fund (HTF) from 90.5 percent in 2005 to 92 percent in fiscal years 2008 and 2009.
The six-year bill is called “Transportation Equity Act: A Legacy for Users (TEA-LU).”
Illustrating how things happen on Capitol Hill, LU also is the nickname of the wife of Rep. Don Young (R- AK), chairman of the House Transportation and Infrastructure Committee, which proposed the House bill. “The bill was named partly for her,” said a committee source.
Young said the multi-year bill will lead to “safer roads that are built faster and last longer.” He noted that the ranking Democrat on the committee arrived late for the funding debate because his car was stuck in traffic.
The new bill is bringing both relief and worry to the construction industry. Relief, because it overcomes an impasse of approximately two years, which had caused much uncertainty about multi-year funding. Worry, because some see its financing as a stopgap that dangerously spends down the trust fund.
Sense of Relief
The agreement, on the final day before Congress recessed for August, relieved a huge concern of state Departments of Transportation (DOTs) and contractors who said they had been unable to plan long-term highway projects without knowing what money they would receive.
The United States has been without a new transportation act since the former law, which authorized $218 billion, expired September 2003. Congress passed 12 temporary extensions to fund state highway construction projects while it wrestled with such issues as the minimum rate of return and White House spending limits.
“With the certainty and funding this new law can provide, state transportation departments can finish out this construction season and plan with confidence for the next several years’ work,” said John Horsley, executive director of the American Association of State Highway and Transportation Officials (AASHTO) in Washington, D.C.
Jennifer Gavin, an AASHTO spokesperson, pointed out that highway and bridge projects “require a multi-year planning and rollout process.”
Stephen Sandherr, chief executive officer of the Associated General Contractors of America (AGC) in Washington, D.C., said states had been contracting for little but maintenance work because of uncertainty. He added that, considering the budgetary constraints and the war in Iraq, “I think we’ve squeezed every penny we could from the negotiations.”
“Having reauthorization in place will provide a stable platform and a better environment for long-term planning, which is a sentiment that I would think is shared by all the states,” said Rich Kirkpatrick, a spokesperson of the Pennsylvania Department of Transportation. “It will greatly help our state transportation commission, which is about to begin a new round of hearings on the next update to our 12-year transportation program.”
As an example of increased funding, Pennsylvania receives approximately 19 percent more in highway and bridge funding, going from $1.3 billion per year to approximately $1.6 billion per year.
Criticized as Inadequate
Construction industry leaders generally said the bill is the best they could get under the circumstances of tremendous competing demands. They caution, however, that there’s still a lot to worry about and often declare the funding is inadequate.
“I think it’s widely recognized that the funding in this bill really is less than the minimum amount that would be needed over this period just to maintain current conditions of highways and mass transit,” William Buechner, vice president of economics and research at the American Road and Transportation Builders Association (ARTBA) in Washington, D.C., told Construction Equipment Guide (CEG). “It may be the best that can be financed from existing projected revenues into the Highway Trust Fund, but it will still not be enough to do what we need to do to maintain current conditions. The bottom line is: between now and 2009 highway conditions and congestion will continue to get worse. We will get to 2010 needing to spend even more. At that point, there will be a definite need for some kind of new mechanism to finance highway construction and public transportation.”
Buechner called TEA-LU “kind of a stopgap, make-do bill, not as adequate as needed and which will not relieve traffic congestion or do the things that people want the highway program to do.”
What does this say about new projects?
“Of course there will be some new projects,” Buechner replied. “Even maintaining current conditions means building some new stuff because traffic keeps getting worse and worse. However, a lot of what the federal program does is simply rebuild, reconstruct, and repair existing highway infrastructure.”
Kenneth Simonson, AGC’s chief economist in Washington, said, “We’re very appreciative that Congress and the White House have reached the maximum amount of spending possible under the existing trust fund and that Congress held firm for a larger amount than the President had proposed in his original budget request [$256 billion], but the needs are much greater. The $375 billion in the [original] House Committee bill was not a number pulled from the air. It represented the actual amount required to bring the transportation system to a level to avoid deterioration in terms of quality of roads and congestion problems. We hope Congress will use the next four years to look for ways of substantially augmenting the trust fund so we can really catch up with the backlog of spending.”
“Congressional approval of the multi-year federal surface transportation legislation is a positive first step because it provides long-term stability to the highway program," said Will Wilkins, executive director of The Road Information Program (TRIP) in Washington, D.C. “The legislation, however, falls far short of what is needed to even maintain our roads and bridges at their current conditions. It is now up to state and local governments to raise the funds needed to pay for improvement projects designed to reduce traffic congestion, improve road and bridge conditions, and improve traffic safety.”
AASHTO’s Gavin, however, said, “We’re not critical at all. We’re in a competitive environment. There’s a war on and there are unexpected needs for homeland security. These two categories of government spending were not happening at the time of the last bill. They are real needs that should be acknowledged and which deserve the dough.”
Highway Trust Fund Imperiled?
Both Simonson and Buechner are worried that the Highway Trust Fund (HTF) will be scraping the bottom of the barrel by 2009.
“I haven’t seen the final projections, but I believe this plan [the new highway bill] would bring the trust fund down to the minimum balances of a few billion dollars, or even closer to zero than thought,” Simonson said. “Projections beyond 2009 certainly don’t show any significant increase in fuel tax revenues, so we hope Congress will find an additional way to get money into transportation projects.”
ARTBA’s Buechner agrees, saying, “I think the projections are that we are probably going to be scraping the [HTF] barrel, with a balance in the two or three billion dollar range, by the end of 2009. A lot depends on the timing of the projects that are financed by this bill. This means that, for the next bill, they will have to come up with something in the way of additional revenues, whether it’s innovative financing, a higher gas tax, or something else.”
New Approaches to Financing
Simonson and Buechner look for “creative financing” to fund transportation projects after 2009.
“We think it’s a promising development that some private construction and development interests have been coming forward in different parts of the country offering to build roads in exchange for collecting revenue for an extended period of time,” Simonson said.
“It’s not the traditional toll road approach, but I think it’s one of those types of creative new financing that we will see.”
Buechner said the new bill also provides “some [financing] opportunities that haven’t been available before; these include a provision allowing up to $15 billion in private activity bonds that would qualify for special tax breaks, and a provision allowing states to impose tolls on some roads.”
The new bill also establishes a new commission to investigate ways of financing highway construction. The commission is to report to Congress before 2010.
“I certainly hope they come up with something,” Buechner said. “The gas tax has been the major thing in the past. It could still do fine for years into the future if Congress were willing to set the gas tax rate at the level that would generate the necessary revenues. Clearly, this time around they weren’t willing to do that. Four years from now, will we have any people with more fire in the belly to do things right, something more than what we’re doing now? Certainly we need more money than we had available for this bill.”
“Donor” states, which pay more into the Highway Trust Fund than they get back, have long fought for a greater return. TEA-LU provides that, toward the end of the program in 2008 and 2009, a new formula will guarantee each state at least 92 cents from every dollar contributed to the fund through gas taxes. This compares with a rate of return of 90.5 percent under current law.
Equipment Sales Should Benefit
Christian Klein, counsel for the Associated Equipment Distributors (AED), said the new law means about $17 billion in market input for the equipment industry between now and 2009.
Klein said the law “is also in important victory for the equipment industry in that it does not include rental preferences.” A provision in the Senate version would have required that before a state purchased equipment, it would have to show it would be cheaper to buy than to rent.
“We were very concerned that Congress was getting into the construction equipment market,” Klein said. “The provision assumed that rental was always preferable, which isn’t true.”
Klein said AED played an important part in helping eliminate the provision.
Thousands of Special Projects
The new bill includes thousands of special projects requested by lawmakers for their states and districts. Taxpayers for Common Sense, which tracks such projects, said they total 6,361 for highway, bus, and rail work and are worth approximately $23 billion. One is a $200-million bridge near Anchorage, AK, which has been dubbed “Don Young’s Way” because of the efforts of the House Transportation and Infrastructure Committee chairman.
The congressionally designated projects include $16-million “high-priority” ones and another $6.2 billion deemed to be of national and regional significance.
Other provisions of TEA-LU include:
• Authority to issue private-activity bonds;
• Expansion of state infrastructure bank provisions to all states;
• Increased investment in research and development, including a new Future Strategic Highway Research Program;
• Greater flexibility for state DOTs to use federal funding for operational improvements and engineering; and
• Streamlining the project-development process for projects that require an environmental impact statement. CEG