THE FUTURE OF INFRASTRUCTURE
AMERICAN CHAMBER OF
COMMERCE EXECUTIVES
Jack Basso
Director of Program Finance and Management
Session Objectives
• To provide a view on the future of infrastructure
• To provide an overview of the state of surface
transportation funding
• To provide a status on the Federal Highway Trust
Fund Conditions
• To discuss some of the critical issues that will affect
the direction of programs and funding
• To discuss some of the alternative revenue/funding
options
• To provide a funding framework for the future
The Future of Transportation
• We are at a critical crossroads in transportation
history
• The nation as a whole has been investing only
about forty percent of what is necessary to meet
needs
• Available resources are at a low point
• Needs on all fronts are growing
Session Questions
•
The key critical issue: the authorization of Federal transportation program challenges in a nutshell
The questions
ƒ
How do we answer the challenge as we approach the future of transportation?
ƒ What needs to be done?
ƒ How much funding is needed?
ƒ For what?
ƒ What is the Federal Role in surface transportation for the future?
ƒ How do we best generate the necessary revenue?
The Future of Transportation
The status of funding
Source: Federal Highway Administration
Reduced Highway Trust Fund-Supported Highway
and Transit Program Levels Beyond 2009
Highway Program (including FMCSA and NHTSA)
Transit Program
50
44.1
45
40
41.0
39.6
36.9
36.3
($ billions)
35
30
25
20
15
10
8.6
9.9
9.0
9.5
10.3
7.1
5.0
5
0
2005
2006
2007
Source: The Fiscal Year 2010 Appendix of the Federal Budget
2008
2009
2010
Decline in Purchasing Power of Motor Fuel Taxes
(Based on Inflation since 1993)
100
90
80
60
50
40
30
20
10
Year
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
0
19
Percentage
70
The Future of Surface
Transportation
• Summary
ƒ We are in an unprecedented crisis
ƒ Immediate action is necessary just to pay the
bills
ƒ The Highway Trust Fund is just about broke
ƒ Inflation has dramatically eroded purchasing
power
ƒ The political climate for user fee increases is
poisoned
The Future of Surface
Transportation
• Issues affecting the future of the Highway and
transit programs
ƒ Sea change in views on investments
ƒ Strong groups opposed to new highway investment
ƒ Congress focusing on climate change/energy issues
ƒ General view that the programs are broken and need
much greater accountability
The Future of Surface
Transportation
THE COUNTER POINTS
NEEDS AND OPTIONS
AASHTO Bottom Line Report:
Trends
• VMT increase
ƒ 2.4 trillion miles in 1993
ƒ 3+ trillion miles in 2007
ƒ 2.9 trillion miles currently
• Population increase
ƒ 305 million in 2005
ƒ 420+ million 2050
• Truck freight expected to increase by 100%
by 2030
AASHTO Bottom Line Report:
Needs
• Highway Investment Requirements
ƒ Passenger vehicle demand parallels population growth (1%
per year)
ƒ Truck freight demand parallels economic growth (2 to 3% per
year)
ƒ Growth in VMT will at least equal population growth
• Current spending is $78 billion
Growth Rate of VMT Per
Year
Cost to Improve Highways
(2006 Dollars)
1.4 percent
$166 billion
1.0 percent
$132 billion
NATIONAL SURFACE
TRANSPORTATION
POLICY AND REVENUE STUDY
COMMISSION
Needs, Findings &
Recommendations
Needs
• We need to spend $225 to $340 billion per year
on average through 2055
ƒ
ƒ
ƒ
ƒ
ƒ
Highway
Bridge
Public transit
Freight rail
Intercity passenger rail
• Currently spending is less than $90 billion per
year
Findings
• We need a clear, comprehensive, well-articulated,
and widely understood strategic vision
• Federal program be consolidated and reformed to
address “objectives of genuine national interest”
Recommendations
• Gas tax remains viable for 20 years
• Take immediate action to keep the HTF solvent
• Increase gas tax between 5 to 8 cents per year over the
next five years
• Index after 5 years to inflation
• Increase truck sales taxes proportionately
• Long-term: Beyond 2025, develop alternatives to the
fuel tax
ƒ Such as distance-based user fees (e.g. VMT fee)
ƒ Next reauthorization should require a major study of funding
options
NATIONAL SURFACE
TRANSPORTATION
INFRASTRUCTURE FINANCING
COMMISSION
Needs, Findings, &
Recommendations
Needs
ƒ Nationally, meeting only
about 1/3 of roughly $200
billion required each year to
maintain and improve the
system
ƒ At federal level, also meeting
only about 1/3 of needs – we
face a $400 billion federal
funding gap over next 6
years under current policies
and revenues
Findings
• The current path is unacceptable
• System demands are outpacing current investments
• Fuel tax-based funding approach is insufficient at
current rates
• Sustainability of fuel taxes is eroding quickly and
unlikely to follow smooth path, with technology
advancement and determination to address global
climate change
• In the short term, feasible options are limited
Recommendations
• Begin transition to mileage-based user (VMT) fee as
soon as possible, with 2020 as implementation goal
• Maintain/strengthen integrity of the Highway Trust
Fund
• Increase existing HTF revenue sources
• Tolling and Other Direct User Fee Initiatives
• Federal Assistance, Financing Incentives, Tax
Policy
• Private Sector Financial Participation (PPPs)
FINANCING AND FUNDING
AASHTO’s Vastly Expanded
Funding Proposal
Conditions
• Federal government must continue to play a strong role in
investing and maintaining an integrated and multimodal
national surface transportation system
• States and local governments should be provided with
maximum flexibility to use federal revenues from existing
core sources to meet systemic transportation needs
• Strong accountability measures must accompany
substantially increased funding to ensure resources are spent
as efficiently and effectively as possible
Conditions
• We need to restore purchasing power
• Investment levels over the long-term need to
correlate with documented needs
• Investments in safety and research remain a
compelling need
• The impact of inflation on commodities and
construction costs must be addressed in setting
investment levels
BACK TO BASICS
The Framework
The Future of Surface
Transportation
• The good and bad news
ƒ The good news: a high priority given to infrastructure
ƒ Authorization is underway and we have excellent
Congressional leadership
ƒ The bad news: The Highway Trust Fund is going
broke
ƒ There is no support for increasing user fees
ƒ There are many competing goals at the national level
Legislative Recommendations
Between 2010 and 2015, in order to invest in a robust
surface transportation program to meet significant
national needs, Congress should fund a $545 billion
multimodal program comprised of:
ƒ
ƒ
Highway program funded at $375 billion
(2015 level = $75 billion)
Transit program funded at $93 billion
(2015 level = $18.5 billion)
ƒ
Freight program funded at $42 billion
(2015 level = $9 billion)
ƒ
Intercity passenger rail program funded at $35 billion
(2015 level = $6.5 billion)
Legislative Recommendations
•
Maintain the current federal and state shares for
highway and transit capital programs.
•
Eliminate or drastically limit earmarking in federal
transportation programs.
•
Develop policies that support maximum flexibility
to allow for use of both conventional and
innovative funding and financing tools.
Legislative Recommendations
•
Create a Commission to recommend to Congress
periodic adjustments for revenues necessary to meet
program needs.
•
Adopt a long-range approach to funding the surface
transportation system that gradually moves away from
dependence on the current motor fuels tax to a distancebased direct user fee such as a fee on vehicle miles
traveled.
•
Assure that any climate change legislation that creates a
new revenue source, either through a carbon tax or capand-trade, provides substantial funding for transportation.
Future Revenue Collection
• The current system relies on fuel taxes
• We have seen a marked decline in revenues
• Two National commissions have called for short
and long-term solutions
• VMT collection systems have come to the
forefront of options to consider
Future Revenue Collection
AASHTO POLICIES
• Short-run: increase fuel taxes to fund a robust set of
programs
• Study the feasibility of alternatives, e.g. VMT fees
ƒ SCOFA committee recommended authorizing a series of pilots
on VMT options
ƒ AASHTO policy adopted last October calls for:
o
Adopt a long-range approach that moves to a distance based user
fee system such as VMT
o
Fund concept tests in the next cycle and plan for change
What are the considerations?
• Adequate research on new systems
• Bridging the gap between the needs today and
new systems
• Overcoming problems such as perceived privacy
issues
• Undertake evolution not revolution
• Develop communications to prepare for change
Proposed Program Funding Levels
to Restore Purchasing Power
Potential Program Name
2010
2011
2012
2013
2014
2015
TOTAL
Preservation and Renewal
$28.00
$30.80
$33.60
$36.40
$39.20
$42.00
$210.00
Highway Freight (Based on Existing Revenues)
$2.40
$2.64
$2.88
$3.12
$3.36
$3.60
$18.00
Highway Safety Improvement Program
$2.60
$2.86
$3.12
$3.38
$3.64
$3.90
$19.50
Operations
$2.40
$2.64
$2.88
$3.12
$3.36
$3.60
$18.00
Transportation System Improvement/Congestion Reduction
$11.10
$12.21
$13.32
$14.43
$15.54
$16.65
$83.25
Environment Program
$3.50
$3.85
$4.20
$4.55
$4.90
$5.25
$26.25
TOTAL - Highways
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
$375.00
TOTAL - Transit
$12.5
$13.7
$14.9
$16.1
$17.3
$18.5
$93.00
TOTAL - Freight (Based on New Revenues
Outside of Highway Trust Fund)
$5.0
$5.8
$6.6
$7.4
$8.2
$9.0
$42.00
TOTAL - Intercity Passenger Rail
$5.0
$5.3
$5.6
$5.9
$6.2
$7.0
$35.00
$72.50
$79.80
$87.10
GRAND TOTAL
$94.40 $101.70 $109.50
$545.00
Surface Transportation Funding Options Matrix (all revenue estimates in $millions)
Funding Mechanisms
Annual Average Annual
Illustrative Revenues
Revenues
Rate
2010
2010-2015
Mechanism Yield
(2010)
Total
Revenues
2010-2015
Annual Highway Miles Traveled Fee (Cars Only)
1¢/VMT =
$ 17,298
1.0¢
$
17,298
$
17,616
$
105,696
Annual Highway Miles Traveled Fee (All light duty vehicles)
1¢/VMT =
$ 27,610
1.0¢
$
27,610
$
28,682
$
172,094
$
263
$1.00
$
263
$
275
$
1,652
1¢/gal or equiv = $
553
30.0¢
$
16,594
$
17,250
$
103,501
$1 per TEU =
$
57
$20.00
$
1,137
$
1,336
$
8,013
1¢/gal =
$
411
13.0¢
$
5,337
$
5,976
$
35,856
$
40,566
$
42,569
$
255,413
$
13,796
$
15,082
$
90,489
General Fund Support for Intercity Passenger Rail
$
3,000
$
3,000
$
18,000
General Fund Transfers for Transit
$
3,167
$
3,167
$
19,000
Index Existing Highway Trust Fund Sources Beginning in 2010
$
791
$
3,032
$
18,192
Index Heavy Vehicle Use Tax Retroactively to 1997
$
411
$
536
$
3,217
Interest on Highway Trust Fund Balances
$
200
$
200
$
1,200
Motor Fuel Tax Exemption Reimbursement (Retroactive and Future)
$
1,057
$
1,099
$
6,593
2.5%
$
15,340
$
15,658
$
93,949
5.0%
$
1,570
$
1,817
$
10,904
Tax Credit Bonds for Highways and Transit
$
8,333
$
8,333
$
50,000
Tax Credit Bonds for Intercity Passenger Rail
$
4,167
$
4,167
$
25,000
Annual Highway User Vehicle Fee
Carbon Tax or Cap And Trade Auction Proceeds
Container Tax
Diesel Tax Increase Plus Indexing
$1.00 Fee =
Existing Highway Trust Fund Sources
Gas Tax Increase Plus Indexing
1¢/gal =
$ 1,380
Sales Tax on Motor Fuels
1.0% of Sales =
$ 6,136
Share of US Customs Revenues
1% of Receipts = $
314
10.0¢
Ton Freight Charge -- All Modes
1¢/ton =
$
162
10.0¢
$
1,617
$
1,801
$
10,804
Ton Freight Charge -- Truck Only
1¢/ton =
$
111
10.0¢
$
1,115
$
1,242
$
7,452
Ton-Mile Freight Charge -- All Modes
1¢/ton-mile =
$ 42,763
0.1¢
$
4,276
$
4,763
$
28,579
Ton-Mile Freight Charge -- Truck Only
1¢/ton-mile =
$ 12,516
0.1¢
$
1,252
$
1,394
$
8,365
US Freight Bill -- All Modes
1% of Sales = $ 7,708
1.0%
$
7,708
$
8,585
$
51,513
US Freight Bill -- Truck Only
1% of Sales = $ 6,497
1.0%
$
6,497
$
7,237
$
43,420
Vehicle Sales Tax on New Passenger Cars/Light-duty Trucks
1% of Sales =
$ 4,853
2.0%
$
9,707
$
10,812
$
64,870
Vehicle Sales Tax on New/Used Passenger Cars/Light-duty Trucks
1% of Sales =
$ 9,012
2.0%
$
18,024
$
20,077
$
120,461
$ 210,831
$
225,705
$
1,354,232
Total Revenues
The future of Infrastructure
Questions?
Contact: Jack Basso
Email [email protected]
Phone 202-624-3508