August 1, 2009
Stimulus funds jump-start construction in some areas, but long-term funding is needed for sustainable recovery.
by Therese Dunphy, Editor-in-Chief
Hungry for business, many aggregates producers are looking for opportunities created through federal highway funding, but the last six months have been a wild rollercoaster adventure, and the steepest hills may be at the end of this ride.
The American Recovery and Reinvestment Act of 2009 (ARRA) injected much-needed funds into the market, but even as it jump-started spending for many infrastructure projects, the ability of departments of transportation (DOTs) to initiate big projects may be in jeopardy. At Aggregates Manager press time, the Highway Trust Fund (HTF) is nearing a zero balance, and Congress and President Obama are clashing on the merits of immediate-versus-delayed transportation reauthorization.
A gentle hill
Passed on Feb. 17, the ARRA appropriated $64.1 billion for infrastructure investment to improve the nation’s infrastructure. Of those funds, $48.1 billion are to be administered by the Federal Highway Administration (FHWA). States eagerly lined up and all submitted their requests for funding of shovel-ready projects 10 days before the end of June when they were due.
“So far all 50 states and the territories have obligated or dedicated $16 billion dollars of their highway stimulus money to over 5,000 construction projects,” John Porcari, deputy secretary of transportation, blogged on June 26. “Of those projects, over 1,500 of them are underway — bids are being made, equipment and supplies are being purchased, contractors are hiring, and workers are working.”
Porcari wrote the post on the White House blog site in response to a June 25 USA Today article that said only a fraction of the dollars dedicated to construction spending are actually reaching the states.
Also on June 25, House Republicans serving on the Committee on Transportation and Infrastructure released a minority report detailing its views of ARRA’s impact on transportation programs during its first 120 days. The report notes that construction employment declined in most metropolitan areas from April 2008 to April 2009 and raises concerns that the Buy American language in stimulus-related regulations is driving up the cost of some construction projects while delaying others.
Even as states gobble up stimulus funds, the HTF is once-again poised to become insolvent.
Last year, as the HTF neared a zero balance, Congress passed legislation to reimburse it for $8 billion that was transferred to the General Fund in 1998. The fund, which could be depleted as soon as this month, is likely to be addressed via Congress and President Obama, but action may not be taken before its declining balance begins to impact state DOTs.
On June 24, Deputy Secretary of Transportation John D. Porcari sent a letter to state DOT officials warning them of the declining fund. “A cash shortfall will affect the ability of the FHWA to reimburse state grantees,” he wrote. “However, as the highway account balance drops — possibly as soon as early August 2009 — it may be necessary for FHWA to make payments to the states on a weekly or biweekly basis rather than daily, which is the current practice with many states… We are monitoring the cash status of the HTF on a daily basis and will continue to explore every possible technical procedure and policy tool available to manage the shortfall.”
Although no one on Capital Hill seems to want the HTF to zero out, vastly different approaches are being voiced.
In testimony before Congress, Jeffrey Paniati, FHWA acting deputy administrator, echoed the administration’s solution: a SAFETEA-LU extension. “Obviously, action is important and needed soon,” he said, noting that Secretary of Transportation Ray LaHood and President Obama want a comprehensive and fully developed approach to reauthorization. “Taking the time in the 18 months to deal with both the initial crisis and develop the comprehensive approach is the most appropriate way to proceed,” Paniati added.
Rep. James Oberstar (D-Minn.), chairman of the House Committee on Transportation and Infrastructure, soon scuttled the idea of party solidarity when he declared the best solution to the HTF crisis is to pass a new six-year transportation bill. “We’ve had no outreach from the administration, no participation, no discussion,” he said. “I’m personally offended by that.”
Peaks and valleys
Oberstar unveiled the committee’s proposal for a six-year, $450-billion surface transportation bill, The Surface Transportation Authorization Act of 2009 (STAA), a day after the administration called for the 18-month delay. Sponsored by Oberstar, committee ranking member John Mica (R-Fla.), Highways and Transit subcommittee chairman Peter DeFazio (D-Ore.), and subcommittee ranking member John Duncan (R-Tenn.), the group says the measure will create 6 million jobs. With six-year guaranteed funding of $350 billion for highways and highway safety, the bill would boost funding nearly 50 percent over the $234.1 billion that SAFETEA-LU allotted.
Various industry and political leaders have offered funding options to increase the ability to pay for the investment. In an interview with TransportationTV (see the full interview at transportationtv.org), National Stone, Sand & Gravel President and CEO Joy Wilson raised the idea of indexing the gas tax, noting that as the cost of maintenance for highways and bridges increases, so would the funds used to repair them. The gas tax is currently 18.4 cents per gallon and has remained at that level since 1993. In comparison, the tax for diesel fuel is currently 24.4 cents per gallon.
STAA sponsor Rep. Peter DeFazio has suggested implementation of a “contingent” tax such as that passed in his home state of Oregon. Under this funding mechanism, increases would only take effect after two consecutive quarters of economic growth and protects the public against a tax increase during a depressed economy.
President Obama and most senators on the Senate Environment and Public Works Committee, however, say they believe an extension makes more sense. Under the euphemism of “Stage I Reauthorization,” the U.S. Department of Transportation laid out the core principles of the extension. They include the following:
• A general fund transfer to the HTF is necessary to maintain its solvency.
• The general fund transfer should be paid for.
• It should include state and Metropolitan Planning Organization capacity-building measures.
• As appropriate, it should include measures to improve regional mobility and access the livability of all communities.
The $20-billion transfer, DOT said, will be paid for via spending cuts and revenue increases, but was vague on details.
Although Senate support for an extension seems firm, members of the House are giving the idea a cool reception. More than 40 Democratic members of the House Committee on Transportation and Infrastructure drafted and signed a blunt letter expressing to President Obama their “profound disappointment” in the extension proposal. They noted that 61,000 miles of the National Highway System are in poor or fair condition, that 152,000 bridges are structurally deficient or functionally obsolete, and that 32,500 public transit buses and vans have exceeded their useful life.
“The administration’s business-as-usual approach, with multiple extensions passed before the enactment of a new multi-year highway, highway safety, and transit authorization act, is unacceptable. That is the failed experience of the past,” they wrote.
“We have a significant opportunity to address the long-term issues impacting our highways and transit systems, and a drawn-out, piecemeal approach to fixing our transportation network will not work.
“We are ready. We have a transformational bill. We will move it through our Committee. We hope to work with your administration; we have requested and continue to welcome your input in finalizing this important legislation in the weeks ahead.”
Web Exclusive Sidebar: Simple Solutions
If passed, the Surface Transportation Authorization Act of 2009 would consolidate or terminate more than 75 programs. Most highway funding would be provided under four, core formula categories, including the following:
• Critical Asset Investment: Consolidates the existing Interstate Maintenance program, National Highway Systems program, and Highway Bridge program into one streamlined program whose goal is to bring the highways and bridges on the NHS to a state of good repair and maintain that condition.
• Highway Safety Improvement: Restructures the Highway Safety Improvement program to focus on reducing motor vehicle crash fatalities and injuries on the nation’s highways, grade-crossings, and rural roads by investing in improvements to remove or lessen roadway safety hazards.
• Surface Transportation: Provides states with surface transportation funding through a flexible program that enables states and metropolitan regions to address state-specific needs including new highway and transit capacity. Facilitates local decision-making and participation by increasing the role of communities.
• Congestion Mitigation and Air Quality Improvement (CMAQ): Restructures the CMAQ program to fund projects that improve air quality, reduce congestion, and improve public health and the livability of communities.
Source: The Surface Transportation Authorization Act of 2009, A Blueprint for Investment and Reform Executive Summary