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Financing Surface Transportation in the United States: Forging a Sustainable Future—Now! (2012)

Chapter: Transportation Priorities: Mapping a Course for the Future

« Previous: Introduction
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Suggested Citation:"Transportation Priorities: Mapping a Course for the Future." National Academies of Sciences, Engineering, and Medicine. 2012. Financing Surface Transportation in the United States: Forging a Sustainable Future—Now!. Washington, DC: The National Academies Press. doi: 10.17226/14664.
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Suggested Citation:"Transportation Priorities: Mapping a Course for the Future." National Academies of Sciences, Engineering, and Medicine. 2012. Financing Surface Transportation in the United States: Forging a Sustainable Future—Now!. Washington, DC: The National Academies Press. doi: 10.17226/14664.
×
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Suggested Citation:"Transportation Priorities: Mapping a Course for the Future." National Academies of Sciences, Engineering, and Medicine. 2012. Financing Surface Transportation in the United States: Forging a Sustainable Future—Now!. Washington, DC: The National Academies Press. doi: 10.17226/14664.
×
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Page 24
Suggested Citation:"Transportation Priorities: Mapping a Course for the Future." National Academies of Sciences, Engineering, and Medicine. 2012. Financing Surface Transportation in the United States: Forging a Sustainable Future—Now!. Washington, DC: The National Academies Press. doi: 10.17226/14664.
×
Page 24

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13 OPENING PLENARY SESSION Transportation Priorities Mapping a Course for the Future Kay McKinley, PBS&J (Moderator) Sherri LeBas, Louisiana Department of Transportation and Development Mark Norman, Transportation Research Board Jane Garvey, Meridiam Infrastructure Victor Mendez, Federal Highway Administration Welcome and PerSPectiveS Kay McKinley, PBS&J, the conference chair, served as the moderator of the opening session. She welcomed par- ticipants to the Transportation Research Board’s (TRB’s) Fourth International Transportation Finance Confer- ence and thanked the Federal Highway Administration (FHWA), the Federal Transit Administration, the Loui- siana Department of Transportation and Development (DOTD), the American Association of State Highway and Transportation Officials, the American Public Trans- portation Association, the Galvin Mobility Project, the National Transportation Center at Morgan State Univer- sity, and the University of Iowa’s Public Policy Center for their patronage and support of the conference. Ms. McKinley recognized the contributions of the organizing committee in bringing this event to fruition. She noted the excellent workshops and the poster session that had taken place the previous day and acknowledged the participa- tion of the experts from the public and private sectors who had assembled to discuss current developments and trends in the transportation finance sector. Ms. McKinley concluded her welcome remarks and invited Sherri LeBas of Louisiana DOTD to the podium. Sherri LeBas, Interim Secretary of the Louisiana DOTD, welcomed conference participants to New Orleans and stated that her organization was proud of its history of innovative procurement, including the use of design–build contracts and the development of new materials. Ms. LeBas cited a number of DOTD’s recent accomplishments, including creation of economic devel- opment zones and evacuation routes and the securing of $430 million in American Recovery and Reinvestment Act funding to support road safety. She indicated that DOTD’s Transportation Infrastructure Model for Eco- nomic Development program has involved bonding a 4-cent sales tax to accelerate an aggressive 20-year pro- gram of highway widening and bridge and port access improvements. Since 2007, Louisiana has invested more than $1.0 billion of its state surplus in transportation needs. DOTD’s LA-1 improvement project is using innovative financing tools to improve roadway access to marine facilities servicing 18 percent of the U.S. petro- leum supply, and the department is the possible user of public–private partnerships (P3s) on its I-10 Lake Charles and I-49 South improvement projects. Mark Norman, Director of TRB’s Technical Activities Division, welcomed conference participants to New Orleans. Looking back to 1997, when the first TRB transportation finance conference was held (Transportation Finance for the 21st Century), he recalled that transportation agencies were finishing up the last of their Intermodal Surface Trans- portation Efficiency Act (the federal surface transportation bill that was funded at $121 billion) money. On the finan- cial front, it was a roller coaster of a year. The Dow Jones Industrial Average closed above 7,000 points for the first time in U.S. history and by July had doubled in value over the previous 30 months. Just 3 months later, stock markets around the world crashed because of investors’ fears of a global economic crisis. The Dow Jones Industrial Average followed suit and plummeted for a point loss exceeding that of 1987’s Black Monday. For the first time, officials at the New York Stock Exchange invoked the “circuit breaker” rule to stop trading.

14 FINANCING SURFACE TRANSPORTATION IN THE UNITED STATES The TRB finance conference held that year focused on new techniques known collectively as innovative finance, which consisted of diverse public- and private-sector actions that moved beyond the traditional federal-aid and state-aid funding processes. In 1997, financing terms and acronyms that are spo- ken of glibly today, such as private activity bonds (PABS), Build America Bonds, state infrastructure banks (SIBs), and P3s, were all cutting-edge approaches in their forma- tive stages. A key innovator behind these new tools was Jane Garvey, who was then serving as Deputy Adminis- trator of FHWA. As the originator of the Grant Antici- pation Revenue Vehicle (GARVEE) bond, she blazed an important trail in the world of innovative finance. By the time of the third conference in 2002 (Meet- ing the Funding Challenge Today, Shaping Policies for Tomorrow), the Transportation Equity Act for the 21st Century was in its fourth year, and transportation pro- fessionals gathered in Chicago, Illinois, to focus on the reauthorization of the federal transportation bill and to exchange information on tools and techniques to deliver more projects faster. Now, 8 years later, Mr. Norman stated that those gathered in New Orleans for the fourth TRB finance con- ference await the reauthorization of the Safe, Account- able, Flexible, Efficient Transportation Equity Act: A Legacy for Users to set the course for national transpor- tation funding. To counter the aftereffects of a 2007 recession and downturns in manufacturing, retail trade, and the finance and insurance industries, new federal initiatives and economic stimuli have been created such as the Trans- portation Investment Generating Economic Recovery (TIGER) and upcoming TIGER II grant programs. Mr. Norman expressed his appreciation to FHWA Adminis- trator Mendez and Ms. Jane Garvey of Meridiam Infra- structure for agreeing to participate in the conference and for sharing information about the TIGER grants and insights on other initiatives. Mr. Norman concluded his remarks by encourag- ing the conference attendees to continue to innovate, experiment, look toward the future, and participate in the thought-provoking discussions and formation of new ideas at the conference to help define unmet research needs that TRB can explore to keep us all moving for- ward. keynote addreSSeS Industry Perspectives on Finance Jane Garvey, the North American Chair of Meridiam Infrastructure, suggested taking a step back to view transportation in the context of geopolitics and econom- ics. Public officials operate in an environment that poses difficult and often conflicting choices. With a funding gap of $142 billion, Ms. Garvey stated that the United States finds itself in unusual and sluggish economic times with a long climb ahead. Economists believe that financial stimulus is needed, but at the same time there is increased concern about the national debt. There are many con- flicts, and the national debt will likely be a defining issue in the upcoming midterm elections in November. Two national commissions have addressed the issue of the national debt. They have worked separately, but they shared information and presented choices and options. Currently, more than half of the nation’s debt is foreign owned. This is an unstable situation; if the United States does not change its ways, 95 percent of federal proceeds will be paid in interest by 2019. Ms. Garvey observed that a situation as difficult and politically charged as the current one does not have a single solution. There is no question that the transporta- tion sector will be affected. Things will change, and the unthinkable is possible. A number of tools are available, such as P3s and tolling the Interstates. While P3s have their detractors, successful P3s occur when the transpor- tation program drives the solution. Arizona and Virginia have enacted statutes requiring that P3s be considered with state programs to address public needs. P3s usually require comprehensive, up-front analysis. Public-sector comparator analysis is one way to ensure that the right decisions are made. Good P3 contracts are also critical in protecting the public interest and aligning public and private interests. With a properly structured P3 arrange- ment, the public sector does not cede control, and there are consequences when a private partner does not per- form appropriately. In the 1990s, the initial ideas for important innovative finance tools including the Transportation Infrastructure Finance and Innovation Act (TIFIA), SIBs, and PABs came from the states as suggestions from the frontline practitioners. In the context of the current national chal- lenge, Ms. Garvey believes that the United States will continue to need this kind of proactive and creative input from transportation agencies meeting needs in the face of reduced revenue and budgets. She noted that the politi- cal atmosphere today is polarized and poisoned, and she expressed the hope that the positive energies of real part- nerships and rational voices will bring real solutions to real problems. Federal Perspectives on Finance Victor Mendez, FHWA Administrator, began his address by stating that he was encouraged to see so many young people and students participating in the conference and that it is the responsibility of more senior transporta-

15TRANSPORTATION PRIORITIES: MAPPING A COURSE FOR THE FUTURE tion professionals to share their experiences with the next generation of practitioners. Administrator Mendez reminded the attendees how important research is and to take advantage of the opportunity to learn from one another throughout the conference. Administrator Mendez remarked that the public often expresses concern about the length of time required to deliver major infrastructure projects. Even though the public may not understand the process, he emphasized that transportation professionals still need to move for- ward in a timely and efficient manner. There is a need to find ways to use technological advances such as the Blackberry, YouTube, and the iPod to improve the deliv- ery of transportation projects. The transportation sector does not appear to be moving as quickly as technology is advancing. He stated that the U.S. Department of Transportation (DOT) is doing innovative work and currently has the opportunity to work with Congress to develop reautho- rization legislation for the 21st century. The department has ideas of what the future of the transportation sector should look like, and it must always consider the needs and wants of the public, with an eye to the bottom line. It is important for the federal government to listen to the ideas coming out of this conference, which will serve as a catalyst for discussion and innovation. It is important to gain insight into public and private perspectives on solu- tions to the nation’s transportation challenges. Administrator Mendez noted that innovative finance tools such as TIFIA credit assistance will remain criti- cal. This was true in 2009 when all P3 transportation projects that reached financial close received TIFIA support. However, in 2010, U.S. DOT has received 39 letters of interest for TIFIA support, with requests for TIFIA loans exceeding $13 billion. These requests exceed the available resources by far. The TIFIA pro- gram is likely to be oversubscribed, and the federal gov- ernment will likely be unable to provide assistance to all projects. U.S. DOT’s new budget includes $4 billion in seed money for a proposed infrastructure fund, with the goal of leveraging $25 billion to capitalize this new tool, which is modeled in many ways after the TIFIA and TIGER programs. He expressed his pleasure that FHWA had invested $26.5 billion in more than 12,000 projects through the Recovery Act. This investment has created or sustained more than 4 million jobs during a period when the econ- omy was losing 760,000 jobs per month. At the same time, the TIGER program has provided an additional $1.5 billion to support 51 projects after having received applications for support of some 400 projects with a com- bined capital cost of $60 billion. This resource imbalance may be a preview of where the nation is headed. Administrator Mendez confirmed that Congress had authorized funding for the Highway Trust Fund through the end of 2010. He noted that Congress has also recognized the value of the TIGER program and authorized an additional $600 million to fund a second round of grants. He stated that the United States must find innovative solutions to meet its transportation needs and that tolling, congestion pricing, and P3s will all be part of the solution. He emphasized that toll- ing needs to pass the tests of political and public opin- ion. To do so, Administrator Mendez emphasized the importance of people receiving value for their expen- ditures. He noted that there is a need to look beyond the revenue stream to see what the ripple effects will be on other aspects of transportation policy. The deci- sions the United States makes today will affect how the nation travels tomorrow. Society needs solutions that reduce emissions and congestion, and it needs to encourage public interest to track this important agenda. The ideas and insight stemming from this con- ference will be invaluable in shaping the next genera- tion of innovative finance tools. Questions and Answers Question: While many people support the use of P3s, the reality is that they do not create funding. One inter- esting aspect of the effort to implement tolls on I-80 in Pennsylvania was a local poll that found that 80 percent of the public would be willing to pay up to $10 more per month to support transportation funding needs. The reality is that the average driver already pays $18 per month in motor fuel taxes, so there appears to be a com- munication gap between public officials’ concerns and their understanding of what the public would actually be willing to pay. Administrator Mendez: Polls are polls. In Arizona, the state recently faced challenges in advancing a bal- lot initiative to approve a 1-cent addition to the state’s $0.18 per gallon motor fuel tax to pay for transportation improvements. The reality is that taxes on cell phones in Arizona are higher and do not generate the same kind of pushback. There are always different political and public filters for issues such as these. Question: Tolling and vehicle miles traveled (VMT) fees are hopefully funding sources, but how can we fund high-speed rail and bike initiatives? Administrator Mendez: U.S. DOT supports high- speed rail. The key question is whether it is sustainable. The underlying theme is to think much more holistically. Ms. Garvey: We will need to raise the gasoline tax, so why not do so gradually? Debate on the debt will help to crystallize thinking on the need to increase the motor fuel tax. The reality is that 50 years after President Eisenhower established the Interstate Highway System,

16 FINANCING SURFACE TRANSPORTATION IN THE UNITED STATES it is clear that the Interstate has facilitated enormous eco- nomic benefits to the U.S. economy. Perhaps high-speed rail will do the same; if we do it right, it could be seminal. Under the current economic conditions, the administra- tion will not raise the gasoline tax. TRB has plans to conduct a study on the long-term maintenance needs of high-speed rail together with potential funding sources. Question: Would it be possible to establish interstate partnerships with information providers? Administrator Mendez: Technology holds the solu- tion to that question. The Research and Innovative Technology Administration has a program under devel- opment to establish technologies to communicate with infrastructure systems to help improve safety conditions, and concepts are under development to enable vehicles to communicate with pedestrians. There are many excit- ing technologies that could be used in this way. Question: The theme of this conference is “Forging a Sustainable Future—Now!” If increases in the gasoline tax are not contemplated and if there is no support for VMT fees, what is the sustainable solution being offered by the administration or Congress that we as transporta- tion professionals could comment on? Administrator Mendez: The United States has a motor fuel tax in place, but it is not generating enough revenue to meet our needs. Greenhouse gas emissions are an issue that needs to be addressed from a policy perspective. There is a funding gap that we cannot figure out how to bridge. Funding for the TIGER program came from the general fund. Ms. Garvey: The funding gap is there—we need to acknowledge this. It will take multiple strategies and a new mind-set to overcome the current funding gap. outline of conference Program and oBjectiveS Ms. McKinley reviewed the conference program and each of the objectives established by the organizing com- mittee for the conference: • Provide a forum for financial information exchange, • Offer intellectual stimulation and exploration, • Invest in America’s future transportation leaders, • Engage the public and elected officials in the trans- portation finance debate, • Provide practitioners with infrastructure financing tools, and • Identify candidate topics for further research. Ms. McKinley indicated that the committee’s choice to hold the conference in New Orleans was made to help support economic development and the post-Katrina recovery efforts in the region. She stated that the orga- nizing committee had ensured that participants include distinguished experts representing the private sector, the public sector, and academia. In addition to the open- ing session’s keynote speakers, FHWA Administrator Mendez and Ms. Jane Garvey, Ms. McKinley confirmed that Michael Tidwell, the award-winning author of the 2003 book Bayou Farewell, would be providing a key- note address during the conference luncheon to provide insight into financial and sustainability challenges in the greater Bayou region of Louisiana. Finally, Ms. McKinley emphasized the organizing committee’s focus on encouraging and facilitating stu- dents’ and young transportation professionals’ participa- tion in the conference. She invited the nine recipients of the student travel scholarships awarded by the confer- ence committee to stand and be acknowledged. To involve students in the conference further, the con- ference planning committee and the Public Policy Center of the University of Iowa coordinated a student video competition. The objective of the competition was to illustrate the public’s understanding of how transporta- tion is funded and to educate the public on the need for transportation funding to inform the policy debate. Ms. McKinley introduced the winners of the student video competition: Allison Reiter, a candidate for a BA in com- munication studies and journalism and mass communi- cations at the University of Iowa, whose video is titled Road Scholars, and Alexandra Sweet and Benjamin Goldman from the University of Pennsylvania, whose video is titled Fahrenheit I-95.

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TRB’s Conference Proceedings 48: Financing Surface Transportation in the United States: Forging a Sustainable Future—Now summarizes a May, 2010 conference that focused on developments in innovative funding techniques and options for securing continued revenue to support national infrastructure and mobility needs.

Views presented in Conference Proceedings 48 reflect the opinions of the individual participants and are not necessarily the views of all conference participants, the planning committee, TRB, or the National Research Council.

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