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| FUTURE
Projects such as Denver's T-Rex await new funds. (Photo
by Gregg Gargan/T-REX) |
The past four years
have been golden for transportation engineers and contractors,
thanks to the 1998 Transportation Equity Act for the 21st
Century, the largest public works funding measure in U.S.
history. When it expires on Sept. 30, TEA-21 will have poured
out more than $220 billion for highway and mass transit projects
around the country, a 40% hike over the six-year program that
preceded it.
As Congress now gets set to start
drafting a TEA-21 successor, industry executives and state
officials are pushing for an encore. They want to boost federal
aid by up to 50% from the 1998 law's total. But they would
be wise not to bank on such a large jump this time, because
U.S. economics have changed dramatically since then.
The federal budget, which enjoyed
a $127-billion surplus in 2001, has plunged deeply into the
red. States are in even poorer shape, perhaps the worst since
World War II, says the National Governors Association. "This
is not the best time to be getting this bill out," says Mortimer
Downey, a principal with Parsons Brinckerhoff's consulting
unit. Click
here to view table
Compared to the late 1990s when
TEA-21 was germinating, its successor faces a tougher birth.
"It's like night and day," says Peter Ruane, president and
CEO of the American Road & Transportation Builders Association.
But he and other advocates insist a sizable gain is possible.
"We can still make the case that
you don't solve congestion and mobility issues without increased
investment," says Stephen E. Sandherr, CEO of the Associated
General Contractors. "It has an economic benefit that will
help us get out of some of the budget problems that we have."
While the industry's Washington
lobbyists have a lot at stake in getting a new bill passed,
its funding level is "the life blood" for highway contractors,
says Cianbro Corp.'s Robert J. Desjardins, vice chairman of
the Pittsfield, Maine, company.
Federal funds accounted for about
40% of the $65 billion in highway capital spending in 2000,
the U.S. Transportation Dept. says. Sandherr adds that transportation
aid spins off to benefit other construction sectors such as
utilities and hotels.
As such, states and industry are
aiming ambitiously high. The American Association of State
Highway and Transportation Officials is recommending a bill
that earmarks $45 billion for highways by fiscal 2009, its
expected final year. The Associated General Contractors seeks
at least $50 billion, while ARTBA proposes $60 billion in
the new measure by that time. Those numbers compare with $32
billion appropriated in 2002. For transit, the American Public
Transportation Association is calling for $14 billion in 2009,
about double the 2002 mark.
The uncertainty makes it hard for
construction firms to plan. "We're nervous about how all this
will come out," says Thomas E. Barron, executive vice president
of Parsons Corp.'s transportation group. "We certainly benefited
from the TEA-21 increase and flexibility in funding, and would
hope the program would continue at least at those levels." Click
here to view chart
The debate is about to intensify.
President Bush is set to release his fiscal 2004 budget plan
on Feb. 3. His request for the federal highway program will
be the dollar figure he's seeking for the first year of TEA-21's
replacement. Within weeks after that, the White House will
release its detailed legislative proposal for the as-yet-unnamed
follow-on.
Federal DOT officials aren't talking
about their 2004 spending figures, but observers don't foresee
good news. "We expect it to be either a hold-the-line or even
a reduction in investment in highways and transit,"says John
Horsley, AASHTO executive director. Says Jay Hansen, National
Asphalt Pavement Association vice president: "We're going
to have to fight like hell to grow this thing."
For fast-growing states like Arizona,
which projects a 50% population boom in the next 20 years,
"it would be devastating if the federal funding didn't go
up," says Stephen Basila, president of Pulice Construction
Co., Phoenix. "We are still playing catch-up with our freeway
system."
State officials and industry allies
say they are not deterred by the expected lack of support
from the White House. They are counting on key members of
Congress to lead the charge. House Transportation and Infrastructure
Committee Chairman Don Young (R-Alaska) has taken the point
position. Young, whose panel will draft the House version
of the legislation, has proposed a "menu of options" that
would provide $60 billion for highways and $12.5 billion for
transit in 2009, a House aide says.
In the Senate, new Environment
and Public Works Committee Chairman James Inhofe (R-Okla.)
will be in charge of developing the highway portion of the
bill. He thinks funding should be increased, a committee spokesman
says. But so far, Inhofe has not set any target figures. The
Senate's transit spending proposals will be handled by the
banking committee, led by new Chairman Richard Shelby, of
Alabama.
Support from Republican chairmen,
along with infrastructure's historic widespread support on
Capitol Hill, make it likely that Congress will adopt an increase
over TEA-21's level. But will the new bill match its predecessor's
40% increase? "It's going to be very difficult to achieve
that, but that doesn't mean we're not going to try," says
Ann D. Warner, Bechtel Infrastructure Corp.'s manager of government
programs.
There are several possible sources
of new money. The longest shot, politically, is raising federal
motor fuels taxes. These range from 13.1 per gallon for gasohol
to 24.4 for diesel fuel. The last significant hikes were
in 1993, including 4.3 for gasoline. Young has an annual
fuels tax boost of 2 per gallon on his menu, an idea proposed
by ARTBA. The American Society of Civil Engineers backs a
6 total hike. NAPA's Hansen says that Congress must "raise
the highway user fee. The entire industry has to get galvanized
around this proposal."
But that is at odds with Bush's
strong anti-tax stance. The Office of Management and Budget
said on Jan. 17 that the administration "strongly opposes"
increasing the fuels tax. At this point, Inhofe does not want
to consider raising the federal fuels tax, "but he wants to
look at other ways of raising the money that we need to pay
for highway needs," says his staffer.
Those alternatives exist. "People
are continuing to drive more, and the amount of fuel consumed
will continue to go up," says Gregory Cohen, vice president
for policy and governmental affairs at the American Highway
Users Alliance. AASHTO estimates that increased travel would
bring in $17.6 billion to the Highway Trust Fund over the
bill's six-year life.
Recapturing the interest on the
trust fund's balance, which would bring in up to $4 billion,
also has wide industry backing. TEA-21 had previously shifted
those interest monies to the general fund.
Offsetting gasohol's hit to the
highway trust fund would raise still more money. Shifting
to the trust fund the 2.5 per gallon of the gasohol tax that
goes to the general fund would be worth another $4 billion.
AGC's Sandherr thinks the administration may include the transfer
in its legislative proposal.
The other gasohol idea would be
to have the general fund reimburse the trust fund for revenue
lost because of the 5.3 tax differential between gasohol
and gasoline. That could add $17 billion, if the consumer
price index goes up 2.6% a year, AASHTO estimates. Inhofe
is "intrigued by the idea of tying the gas tax to inflation,"
says the committee spokesman.
Another top priority for industry
and states will be retaining TEA-21's budget "firewalls,"
says Daniel Duff, APTA's chief counsel. Those provisions ensure
that the bill's authorized funds turn into actual appropriated
dollars. Appropriators were unhappy about this incursion on
their turf, and may well try to chip away at the firewalls
this time around.
But TEA-21's successor won't be
totally about money. It also will give Congress a prime opportunity
to rewrite the surface transportation program's "ground rules."
With industry and state participants aiming to speed project
delivery, one particular legislative target is winning further
"streamlining" of the environmental review process.
The Bush administration's bill
is not expected to propose major changes in TEA-21's structure.
But Federal Highway Administrator Mary Peters told the Transportation
Research Board last month that DOT does want to simplify the
program. "We hope to reduce the separate funding categories
and to consolidate existing core programs to the extent possible,"
she said. NAPA's Hansen thinks that may mean block grants
for highways. Peters also says DOT may propose eliminating
some restrictions to innovative contracting, such as design-build,
and streamlining rules.
But Congress is likely to rework
whatever the administration sends it, fighting to include
projects that benefit their home turf and constituents. States
represented on House transportation and Senate environment
and banking panels of course will fare well. The lineup on
key committees has shifted since TEA-21. Alaska looks more
solid, thanks to Young's move to the House panel chair and
Senate Appropriations Chairman Ted Stevens. Inhofe will take
care of Oklahoma. Missouri will do better than in TEA-21,
now that Christopher Bond is the Senate infrastructure subcommittee
chair. Vermont gains, with ranking environment minority member
James Jeffords (I).
California has Senate appropriations
and environment committee members and the largest House delegation.
But Pennsylvania surely will miss former House transportation
Chairman Bud Shuster, TEA-21's major House force.
Another geopolitical challenge
will be balancing desires of donor states, whose motorists
pay more in fuels taxes than they receive in highway aid,
and "donee" states, whose road funds exceed fuels taxes paid.
In TEA-21, donors won a 90.5% return on their taxes paid.
This round, observers say, donor states, including Oklahoma
and Missouri, want at least a 95% guarantee.
But donees, like Alaska, don't
want to lose ground. "In order to address that adequately
we're going to have to keep shooting for the highest [overall]
amount possible," says Bechtel's Warner.
"Even if the program increases,
one of the big hangups is going to be the states," says Downey.
"Are they going to have the ability to provide the [funding]
match that they need to?" For highways, states typically put
up 20% of project costs; Uncle Sam contributes 80%. For transit,
local shares can top 50%.
States' fiscal pain is severe.
South Carolina faces a general fund deficit that could hit
$1 billion, says Gov. Mark Stanford. Its highway budget is
in even worse shape, says Bob Probst, the state DOT's deputy
director for finance. "This is the fourth year in a row with
no secondary road repairs," he says. It's a huge problem."
AASHTO's Horsley says that even
with deep budget woes, states won't turn back federal aid.
"Somehow they find a way to match what comes in because it's
such a good deal for them. To get 80 on the dollar, generally
you don't pass that up."
If funding fails to match TEA-21's
jump, "it absolutely forces us to re-evaluate some of the
assumptions we had made," says Jeff Morales, director of the
California Dept. of Transportation. Despite higher investment,
potential cutbacks loom. Morales also says a shortfall would
create "a major hole that will be difficult to fill" for a
$3.7-billion Bay Area Rapid Transit extension.
With so many issues up in the air,
observers think Congress won't pass a reauthorization measure
by the Sept. 30 deadline. That's nothing new, since TEA-21
and its transportation predecessors were months late.
But delays won't help cash-strapped
states whose transportation agencies "are looking for money
anywhere they can find it," says former Utah DOT Executive
Director Tom Warne, now a Salt Lake City-based consultant.
"This makes the reauthorization of TEA-21 even more important.
It should be reauthorized by Sept. 30, but it probably won't
be until next year. The timing of the new highway bill will
not be the silver bullet to help us this year."
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