Tag: "Transportation"

Obama Announces $98.1 Billion More Transportation Spending Waste

A major portion of the Administration’s proposed new transportation spending — 21st Century Clean Transportation Plan — is a series of proposals to expand transit systems (31 rail, bus and streetcar systems in 18 states costing $3.5 billion), revive the failed high speed rail initiative, modernize freight systems and provide grants to regional authorities to implement innovative “clean” technologies and “green” transportation programs. This new transportation spending is expected to cost $98.1 billion in just FY 2017.

The President just recently signed a groundbreaking transportation bill — the Fixing America’s Surface Transportation Act or FAST Act — that gave a longer temporary partial solution for the nation’s transportation infrastructure. However, the Fast Act and the new transportation proposal both fail to address several key problems with the Highway Trust Fund and the federal gas tax.

The new administration budget for transportation is a 60% increase over the current annual spending level. To partly pay for the new spending, the Administration is calling for a $10 per barrel tax on oil or a 25 cent/gallon increase in the price of gasoline at the pump which is estimated to bring in $650 billion over a decade.

Despite this, the administration’s budget request was declared dead even before its arrival on Capitol Hill, just like most of Obama’s previous transportation budget proposals.

 

Feb 24, 2016 | 1 comment | by

Transportation Bill Gives Longer Temporary Partial Solution

The Fixing America’s Surface Transportation Act, or the FAST Act was approved by the Senate 83-16, the House on a 359-65 vote and formally signed by the president. The bill reauthorizes the collection of the 18.4 cents per gallon gas tax that is typically used to pay for transportation projects, and also includes $70 billion in “pay-fors” to close a $16 billion deficit in annual transportation funding that has developed as U.S. cars have become more fuel-efficient.

The new law, paid for with gas tax revenue and a package of $70 billion in offsets from other areas of the federal budget, calls for spending approximately $205 billion on highways and $48 billion on transit projects over the next five years. It also reauthorizes the controversial Export-Import Bank’s expired charter until 2019. The bill is paid for by:

  • Raising revenue by selling oil from the nation’s emergency stockpile.
  • Taking money from a Federal Reserve surplus account that works as a sort of cushion to help the bank pay for potential losses.
  • Cutting the dividend paid to banks with assets of at least $10 billion, reinstating a controversial offset that had been eliminated by the House, but narrowing the set of banks to which the cut would apply.
  • Preserving a measure intended to raise money by hiring outside debt collectors to collect unpaid taxes.
  • Increasing the fees paid by travelers who go through customs.
  • Directing to the Highway Trust Fund penalties paid for motor-vehicle safety violations.

However, the bill was rushed and failed to address several key problems with the Highway Trust Fund and the federal gas tax. The federal gas tax clearly requires major reforms to work efficiently again. Some proposed reforms include:

  • Eliminating the Mass Transit Fund and all other non highway funding through the Department of Transportation, saving $16 billion annually that could be used for additional highway funding.
  • Raising the federal gas tax to compensate for inflation since it was last raised in 1993, and adjusting for future inflation, which would bring in 40 percent more, or $10 billion a year.
  • Repealing the Davis-Bacon Act, saving $11 billion annually in construction costs.

The Fixing America’s Surface Transportation Act, or the FAST Act was rushed and gave a five year extension to a partially funded federal highway system, while missing out on key Highway Trust Fund and federal gas tax collection reform elements.

Dec 16, 2015 | Leave a Comment | by

The Bargain Mass Transit Option

SkyTran is an aerial mass transit system with small cars that magnetically glides on elevated tracks 20 to 30 feet above the ground. The cars can hold up to four people and travel at 60mph.

SkyTran has been in development over the past five years and is just beginning to run a pilot program in Tel Aviv. Compared with most mass transit options, SkyTran is a bargain for cities planning mass transit or expanding their existing systems.

For instance, the city of Dallas has a large light rail system (DART) that was recently expanded to double in size to over 90 miles of track. The $2.5 billion expansion cost $56 million per mile ($35 million per kilometer). In addition, the $7.3 million cost for each rail car that holds 209 passengers gives a cost of $35,000 per passenger.

SkyTran, however, costs only $13 million per mile ($8 million per kilometer). The small cars only cost $30,000 at a price of $7,500 per passenger.

The city of Dallas could have saved almost $2 billion in light rail mass transit expansion if SkyTran had been an available choice in mass transit.

 

Nov 04, 2015 | 5 comments | by

Senate Energy Policy Leaves Out Oil and Highway Funding

The focus of the Energy Policy Modernization Act of 2015 includes energy efficiency and conservation, protecting the electric grid and speeding up the application process for liquid natural gas refineries. The bill includes:

  • The secretary of the Energy Department to issue a final decision on applications to export liquefied natural gas within 45 days after projects have won approval from the Federal Energy Regulatory Commission.
  • The Strategic Petroleum Reserve, a stockpile of nearly 700 million barrels of oil, should be used only in emergencies — while there are legislative efforts to sell off some of that oil to help pay for surface transportation funding.

The most recent senate energy bill failed to address some of the most important energy issues currently facing the nation. The bill avoided such issues as:

  • The ban on exporting crude oil.
  • Keystone XL pipeline.
  • Federal gas tax reform.
  • The failure to fund our highway system.
  • Renewable Fuel Standard reform.

U.S. energy policy that includes natural gas, but leaves out oil, is not real energy policy. Protecting the electric grid and leaving out critical funding for the highway system, addresses half of our most pressing infrastructure needs.

Jul 27, 2015 | Leave a Comment | by

The Transportation Funding Fight

The fight over the future of transportation funding in the United States has once again pitted the House against the Senate and Republicans against Democrats. In June, the House of Representatives narrowly passed a bill to spend $55.3 billion on transportation and housing projects through December 18. 2015, with only three Democrats voting yes to the bill. The intention of the short-term bill was to give representatives more time to craft a longer term bill. The House bill, however, also included amendments restricting travel to Cuba, blocking funds for the transfer of Guantanamo Bay detainees, and attempted to undo recent trucking regulations, which angered House Democrats and the White House.

Senator Dick Durbin (D-IL) gave a grave warning of the current system of transportation and infrastructure funding.

“We cannot patch our way to prosperity with temporary, short-term answers to long-term problems. In just the past six years, there have been more than 30 extensions of surface transportation programs. This is not the way to run the federal highway and transit program.”

Now it’s the Senate’s turn to attempt to pass their own transportation bill. They have a tight deadline to meet since the last measure passed to finance infrastructure programs in the country expires July 31st.

The Senate Bill, which Senator Mitch McConnell (R-KY) brokered with Senator Barbara Boxer (D-CA) is a six-year authorization, although funding appropriations in the bill extend for only the first three years. The bill allocates $47 billion to fund the revenue gap between federal gas tax and other transportation revenue ($35 billion a year) and yearly expenditures ($50 billion a year).

Problems of funding have also divided the two sides but both sides have been firm in their desire to keep the gas tax at current levels, rather than raising it. The House proposed funding the gap between projected costs and expected revenues with a one-time tax on $2 trillion in business income brought back to the United States.

The Senate bill, on the other hand, includes revenue-increasing methods such as:

  • Selling oil from the Strategic Petroleum Reserve to raise $9 billion.
  • Reducing the dividends paid to certain banks by the Federal Reserve to raise $16.3 billion.
  • Indexing various custom fees to inflation to raise $4 billion.
  • Increasing Transportation Security Administration fees to raise $3.5 billion.
  • Extending certain guarantees on mortgage-backed securities to raise $1.9 billion.
  • Adjusting various tax compliance measures to raise an additional $7.7 billion.

While the Senate bill may not directly raise the gas tax, it increases revenues through various raises in fees (fees which are essentially very similar to taxes). This seems quite contrary to Senator McConnell assurances that the Senate bill “does not increase the deficit or raise taxes.”

Jul 22, 2015 | Leave a Comment | by

Raise Airport Facility Charges and Give Up Improvement Program Funding

Currently, U.S. airports and airlines are fighting a public battle over Passenger Facility Charges (PFCs). PFCs are one of the main mechanisms to fund capital projects such as baggage systems, gates and international arrival facilities. Airports want to increase the fee, and argue that the current $4.50 passenger facility charge, which has not been increased/adjusted since 2000 and equates to $2.45 today, is insufficient. Airlines argues that the PFCs should be kept at $4.50 since over the past 25 years the number of taxes airlines pay has increased from six to 17 and the amount paid has increased from $3.7 billion to $20 billion.

While both sides raise some valid points, airports make the better argument and should be allowed to increase PFCs to whatever level they deem necessary.

First, our aviation system follows the same users-pay/users-benefit principle as our surface transportation system. And PFCs are the purest users-pay/users-benefit funding mechanism. A users pay system is fair since those who pay are the ones who benefit. A users-pay system is proportional since those who fly more pay more and vice versa. A users-pay system is self-limiting since the taxes will be used only on needed infrastructure. A users-pay system is predictable, since such a system, unlike airport improvement funds, will not disappear at Congress’ whim. Finally, a users-pay system provides guidance on the correct amount of investment to make.

Second, airports need continual improvement. With growing passenger traffic many airports need additional gates. Others need to modernize their badly aging security areas and baggage systems. While airports have other tools, principally bonding and airport improvement program (AIP) funds, both these tools are limited. PFCs are more versatile and can be used for a variety of projects including landside (terminal) projects, road access, noise-remediation projects, bond-interest and airside projects.

Third, airports as quasi-independent agencies should be able to raise their own funds. Airlines have added a bevy of tax-exempt fees, which incur no taxes because they are special services and not a part of standard fares. Passengers now pay to check bags, use internet service, reserve seats, purchase food, and purchase priority boarding services. Just as it is the airlines’ right to charge passengers for these optional services, it is the airport’s right to charge passengers for a better baggage system.

Fourth, just as passengers have some choice of airlines they also have some choice of airports. In most of the 20 largest aviation markets there are two or more airports. If an airport goes on a drunken spending spree as Miami International Airport did, airlines and passengers can choose the cheaper alternative of Fort Lauderdale International. Price is a powerful motivator that should keep airports from unreasonable PFC increases.

However, I understand the airline’s concerns of overcharging. And while the cheaper Fort Lauderdale provides an option to overpriced Miami, it would be preferable if such exorbitant costs were prevented in the first place. So in exchange for removing the limit on PFCs, large hub airports should give up AIP funds. Large hub airports rely less on AIP funds than other airports and with PFC funds uncapped, AIP funds become a nice-to-have product not a requirement.

 

Jul 06, 2015 | Leave a Comment | by

Addressing Texas High Speed Rail Concerns

The proposed new high-speed rail (HSR) project in Texas has become a lightning rod for criticism. While the project is different from the now cancelled publicly funded HSR projects in Florida, Michigan, and Ohio and the ongoing project in California, critics remain concerned.

The Texas project supported by Texas Central Railway (TCR) is fundamentally different from the U.S. public government approach in several ways. First, it focuses on one specific corridor (TCR chose one out of 97 it had identified). HSR succeeded in France and Japan because both countries build their first HSR lines on the most optimal corridor, not the most shovel-ready. Contrast that with the Obama Administration’s plans to give money to nearly 40 states. The TCR project is focused on true 200 mile-per-hour high-speed rail while the government program has a multitude of aims:

  • build HSR
  • improve existing rail
  • build political bridges
  • develop passenger rail

Second, the Texas developers are seeking advice and parts from the Japanese, who operate the most successful HSR line in the world. TCR plans to use higher-speed Japanese Shinkansen trains which will travel fast enough to offer 90-minute trip times. Many of the government-funded rail lines are upgrades of existing lines with top speeds of 110 miles per hour.

Third, TCR’s line will link two of the quickest growing metro areas in the country. The metro area populations of Dallas and Houston are expected to double. Contrast that with Los Angeles and San Francisco that are seeing little if any growth in population.

Fourth, both are privately funded. While TCR will not accept grants or subsidies, it will consider existing federal credit assistance such as Railroad Reinvestment and Financing (RRIF) or Transportation Infrastructure Finance and Innovation (TIFIA) loans. TIFIA financing requires an investment-grade rating while RRIF is being strengthened to include similar provisions. TCR might also seek DOT approval to issue tax-exempt private activity bonds (PABs), which are widely used on highway P3 concession projects. Such bonds are backed solely by project revenue. Taxpayers are not on the hook in case the project defaults; only the bond-buyers are.

Project opponents have raised legitimate concerns but none of them should delay the project. Some farmers and ranchers are concerned that their properties will be acquired through eminent domain. However, TRC only needs about 100 feet of eminent domain. Additionally, the agency plans to use eminent domain (as other private parties including pipelines companies and electric companies do) as a last resort and only after making market-value offers. Further, if there are abuses of the system, Texas has a detailed appeal system already used for the Keystone Pipeline.

Others are concerned that taxpayer subsidies will be required. Whether TCR can build its project within the budget estimated is an open question. Given the challenges of breaking even on HSR in a low-density state such as Texas, skepticism is appropriate. However, as long as taxpayer funds are not used, project sponsors should be allowed to try to build the train. If the project later requires taxpayer subsidies, Texas taxpayers should kill it. While the financial realities are a legitimate concern for those who invest equity in the program or buy bonds, the program should receive the same level of legal and regulatory scrutiny as any other private railroad project.

Jun 29, 2015 | 3 comments | by

Tolling is a Critical Funding Tool for Texas

Over the last two years, a groundswell of opposition has arisen to tolling in Texas. A number of groups including Toll Free Texas and Texans Uniting for Reform and Freedom have been lobbying to eliminate all tollroads in the state. Several Texas State Representatives and Senators have filed multiple bills to prioritize non-tolled roads and make building tolled roads much more challenging. Certain bills such as HB 856 that requires MPOs to stream, record and publish meetings are not anti-tolling. Other provisions such as one in HB/SB 1834 that ensures tolls are used to repay the cost of the road are a positive. But as a whole, the package of bills that requires elected officials to affirm support for a toll project multiple times and requires the conversion of tolled roads to non-tolled roads within 20 years is troubling.

The frustration with tolling is understandable. Nobody wants to pay any more than they have to. But everybody agrees having a quality roadway network is critical. Surface transportation policy in Texas and across the country has long been based on a users-pay/users-benefit principle. The users payment system has several advantages. First, it is fair. Those who pay the users fees receive the benefits. Second, it is proportional. Those who driver farther pay more. Third, it is self-limiting. A user tax that can only be spent on a certain purpose prevents officials from increasing taxes. Fourth, it is predictable. A user fee does not have to worry about economic downturns or political whims. Fifth, it is an investment signal. It answers the question of how much infrastructure to build.

Historically, the best user fee was the gasoline tax. People traveling longer distances used more fuel; heavier vehicles that damaged the road consumed more gasoline than light duty cars. However, the gas tax is no longer a good proxy for highway use. The emergence of electric and hybrid vehicles means some people pay dramatically more to drive than others. Now, the folks who pay the most are very often rural drivers despite the fact that rural roads are some of the cheapest to maintain.

And if that is not bad enough, there is the question of diversions. The federal government diverts about 30% of its gas tax funding to transit, biking, walking and invasive species removal. Certain environmental groups got all bent out of shape when the latest surface transportation bill, Moving Ahead for Progress in the 21st Century (MAP 21), outlawed the use of gas tax revenue for transportation museums. Oh the horror! But the policy changes fixed a fraction of the problems. The changes said “no” to gas tax funding for a transportation museum in Illinois but allowed funding to continue for recreational trails in Oregon.

Texas also has a statewide gas tax. But similar to the federal gas tax, it diverts money to projects that have nothing to do with roadways. By law, 25% of motor fuel tax proceeds are diverted to education. Education is clearly important, but using gas taxes to fund education is a clear violation of the users-pay/users-benefit principle. Some in the Texas legislature hope to end the education diversion but such a change is extremely unlikely to pass. So neither the federal nor state gas taxes are true user fees.

Texas policy makers have floated a number of other transportation funding ideas, none of which is a good user fee. With sales taxes there is no link between how much someone buys and how far they travel. Throughout the country there has been tremendous pressure to charge more in sales tax than is needed for a specific program and then use the excess taxpayer revenue to support non-transportation improvements.

Last year, Texas voters approved spending 50% of the royalties from oil and gas drilling on highways. While voters and policy makers were understandably looking for a good political solution, there are several reasons why this is not the best long-term option. The link between transportation and increased drilling is weak. More troubling, with the price of oil lower, hydraulic fracking no longer makes economic sense in some Texas communities. Any decline in fracking will lead to less revenue.

So while it might not be popular tolling is the most realistic solution for funding large parts of Texas’ transportation system. Unlike the gas tax, it is 100% dedicated to roadways. Unlike the gas tax, an increase in electric and hybrid vehicles will not affect its viability as a funding source. Unlike the gas tax, it can be increased during peak hours and decreased during off-hours to improve mobility. Unlike fracking it provides a stable revenue source. Unlike a sales tax it is a good proxy for road usage and can serve as a signal to investors when it is time to invest in a facility. Put simply, tolling has to be part of the solution.

 

Jun 24, 2015 | Leave a Comment | by

Obama Takes Aim at Big Trucks

On Friday, the Obama administration officially announced plans to further lower carbon emissions in the United States. This new rule, issued by the Environmental Protection Agency (EPA) and the Transportation Department, aims to increase the fuel efficiency of the large trucks crossing the country everyday. New regulations will also affect other trucks, such as delivery vehicles, dump trucks and buses.

Two categories of standards were created, one for the front part of big trucks, called tractors, and one for trailers that trucks haul. The tractor standard will be implemented for those built in 2021 and require efficiency increases of up to 24 percent. This will be the first time, however, that regulations extend to trailers. The first federal standards for big trucks were announced in 2011 for any truck models built between 2014 and 2018.

The rules threaten to impose undue burdens on the trucking industry — an industry responsible for the transportation of food, raw goods, and most freight in the country. Adjusting to these new rules will require improvements in aerodynamics and the use of lighter materials as well as tweaks in current engine and transmission technology. The EPA stated the industry would be able to recoup their costs within two years for trucks with trailers. For smaller trucks and buses, the recoup time may be as long as three to six years.

These new regulations are just the next step in a long line of new rules implemented under the Obama administration. In his first term, President Obama discussed limitations on automobile emissions. These were followed by new rules set by the EPA for power plants and more recently potential regulations on airplane engine emissions.

 

Jun 22, 2015 | 2 comments | by

Committee for Responsible Budget Highway Plan has Issues

Recently, the Committee for a Responsible Federal Budget, released a report titled, “The Road to Sustainable Highway Funding.” The committee, which includes Erskine Bowles and Alan Simpson, builds on many of the transportation recommendations included in the Bowles-Simpson report. It recommends passage of comprehensive tax reform while ensuring the Highway Trust Fund remains adequately funded. It includes three steps:

  • Getting the Trust Fund Up to Speed ($25 billion) by paying the “legacy costs” of pre-2015 obligations with savings elsewhere in the budget;
  • Bridging the Funding Gap ($150 billion) with a policy of raising the gas tax by 9 cents and limiting annual spending to income; and
  • Creating a Fast Lane to Tax Reform to help Congress identify alternative funding and financing.

The report is a great attempt at creating a sensible national transportation policy which is something that seems to elude Congress. Many of its suggestions are excellent. These include reducing funds for the Congestion Mitigation and Air Quality program (CMAQ), eliminating Davis-Bacon requirements and killing the transportation alternatives program. Keeping federal transportation funding constant is an excellent goal. Limiting future spending to income is a great idea that seems obvious everywhere but Washington, D.C. Encouraging future highway bills to make tax and spending decisions together would be great policy, although I am not sure how this occurs without the Ways and Means Committee losing power, which would never happen politically.

However, some of the bill components are troubling. First, to get the Highway Trust Fund up to speed, the plan spends $15 billion reducing and reforming agricultural subsidies and $10 billion extending the mandatory sequester. While reforming farm policy is a great idea, since paying farmers not to plant certain crops has always been one of our most curious policies, such funding should not be directed to the highway trust fund. Rather, it should pay down general fund debt. There is no real link between farming and transportation.

Second, a two-year highway bill is better than a series of extensions but does not provide the needed long-term certainty. It takes 10 years or longer to complete many highway projects. Securing sufficient funding requires a mix of public and private funding that requires complex deals. DOTs need long-term certainty, and two years is not long-term enough. The traditional six-year bills are also a little short. Ten years would be ideal.

Third, the group proposes to schedule a 9-cent increase after one year. Such an increase is reasonable but only with significant program reforms. Policy makers should also eliminate Buy America. Federal caps on financing tools including Private Activity Bonds need to be increased. And while a 9-cent increase would be a short-medium term solution, increasing fuel efficiency and the presence of electric and hybrid cars, makes the gas tax a poor long-term solution.

Finally, the report’s acceptance of the blanket spending cuts in the sequester (as a baseline) is poor policy. The sequester cut discretionary programs such as Next-Gen which is a core national priority for aviation while not touching formula programs such as streetcars which are neither a national nor a core transportation program. The sequester cuts should be examined to ensure that areas cut do not serve a vital national function.

Jun 22, 2015 | 1 comment | by
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