"MAP-21 (Moving Ahead for Progress in the 21st Century Act) Reauthorization: The Economic Importance of Maintaining Federal Investments in our Transportation Infrastructure."
Chairman Boxer, Ranking Member Vitter and distinguished members of the
I want to start by saying "thank you" for the bipartisan highway, transit and safety law, Moving Ahead for Progress in the 21st Century (MAP-21), which ended years of short term extensions that created a great deal of uncertainty for businesses and infrastructure owners and operators. This year,
This testimony outlines the case for a strong federal role based on the economic importance of ensuring that we have a 21st century infrastructure to support a 21st century economy. Then it focuses on the challenge of federal
The Case for Federal Leadership and Investment
"Infrastructure is not the end result of economic activity; rather it is the framework that makes economic activity possible." ni
A first rate national transportation system is necessary in order to maintain a first rate economy in
A transportation system that works for businesses can propel economic growth and, conversely, one that falls short of performing as it needs to will drag down the economy. This is the key finding of the Chamber's Transportation Performance Index (TPI). First released in 2010, the TPI demonstrates that enhancing the performance of transportation infrastructure is a vital part of creating the sustainable long-term growth our nation desperately needs.
The TPI comprises roughly 20 weighted indicators in each mode of transportation falling into three categories:
. Supply, described as the availability of infrastructure, which is a key consideration for businesses when deciding where to locate their facilities;
. Quality of service, the reliability of infrastructure, whether it supports predictable and transportation services and travel; and,
. Utilization, whether current infrastructure can sustain future growth. Utilization is a key consideration for companies that look years into the future to inform the decisions and capital investments they make today.
Together, the indicators provide a snapshot of transportation system performance across U.S. geography, economic sectors, and demographics. Much like the Dow Jones Industrial Index indicates financial market performance, the TPI is an aggregate measure that is a useful snapshot of the transportation system as a whole at a point in time. By watching it over time, trends and fundamental system health are slowly revealed.
The inaugural TPI, calculated for 1990-2008, reflected a six percent increase in performance over that period. In contrast, the U.S. population grew 22 percent, passenger travel grew 39 percent, and freight traffic grew 27 percent. Given these facts, it is a testament to business ingenuity that the TPI was not worse. Businesses work around transportation challenges by scheduling deliveries in off-peak hours, implementing flexible employee work policies, and substituting information technology for transportation services. There are also countless stories of transportation infrastructure owners using the engineering equivalent of duct tape to hold infrastructure together and crafting creative operational strategies to enhance throughput.
In the 2011 update, the data showed a distinct uptick in the TPI. According to Dr.
Much of the improvement in the TPI may be attributed, in the final analysis, to the decline in economic activity in 2009. But that begs a question: if we can improve the performance of transportation infrastructure by stopping economic growth, is that progress? Of course, the answer is 'no'. Stopping economic growth is not progress; it is not a solution to the problem of poor performing transportation infrastructure in America. Likewise, although raising gasoline prices to
Gross Domestic Product and Transportation Performance
There is a strong correlation between performance, which the TPI defines as the degree to which the transportation system serves U.S. economic and multi-level business community objectives, and economic growth as measured by Gross Domestic Product (GDP). In short,
This analysis is unique because it goes beyond merely charting the effects of spending and job creation during construction. The findings of the TPI economic analysis are "different from studies on how infrastructure spending creates jobs in the construction industry or any of a multitude of cost/benefit studies in use today. By controlling for the primary factors known to impact economic development, we are able to segregate a change in the economy that is most likely attributable to the performance of transportation infrastructure." niii
Instead, the analysis provides robust, stable results showing the overall contribution to economic growth from well-performing transportation infrastructure as fundamental to maintaining a strong economy. niv Specifically,
Every one point decline or increase in the TPI correlated to a corresponding decrease or increase of 0.3 percent of GDP. A status quo scenario--largely unchanged priorities, policies, regulations and investment levels--translated to
The U.S. Chamber works every day to build bridges to promising markets abroad, to tear down the barriers that shut U.S. exports out of foreign markets, and to secure a brighter future where international commerce generates economic growth and job creation at home. Increasing investment in transportation infrastructure is central to these goals.
The TPI econometric analysis exposed a strong correlation between transportation infrastructure performance and foreign direct investment (FDI) in
According to the
New enterprises established by FDI may be more dependent on transportation infrastructure than other types of infrastructure because of the need to move goods and people between the foreign country and
OFII's report, "
America's infrastructure crisis is threatening America's global competitiveness because it is eroding the country's ability to attract and retain dynamic global companies that create high-productivity, high-wage jobs. America's ability to meet the infrastructure needs of dynamic global companies increasingly lags the ability of many other countries--in contrast to much of 20th century, when America's infrastructure was a strong pull attracting these companies. In
Without smart investment in U.S. infrastructure, American businesses will lose ground to major international competitors. Less-developed and emerging market competitor countries recognize the benefits of well-developed infrastructure and are preparing their transportation systems to move away from producing low-wage goods to producing the types of products that require the specialization of labor that transportation infrastructure makes possible. nviii
Markets outside of
The Chamber promotes expanding American trade, two-way investment, and tourism through an ambitious agenda to open international markets and reduce commercial barriers at home and abroad. Our country should make a major effort to attract more global investors. High performing transportation networks draw FDI, because infrastructure supports predictable logistics, which are important to efficient trade.
Globally, logistics costs have fallen from about 20 percent of GDP in the early 1980s to less than 10 percent. However, delays and unpredictability greatly outweigh direct transportation costs (
Unfortunately, much of
An examination of the data for the US and
Why the extra time to cover half the distance? A pervasive problem in
Most drivers allow a little extra time when driving during rush hour, especially for important trips like getting to the airport or picking up kids after school, but the message of the
Compare this to businesses that use the transportation system every day and then start doing the math: UPS carries six percent of U.S. GDP within its system every day. If every UPS vehicle suffers a five minute congestion delay every day of the year, the annual operating cost to UPS increases by
The services sector also suffers when congestion and lack of connectivity create inefficiency and, in some cases, deterrence for travel at all. The travel and tourism industry represents another clear example of an industry with job and growth opportunities that is heavily reliant on transportation.
In my business, the travel industry, we see tremendous opportunities for growth in a sector that already generates
Businesses place a high value on mobility--of their employees, customers, and supply chains-- and are solution oriented. Chamber members have grown frustrated with the repetitive debates over whether one mode is more important than another, or if one jurisdiction is receiving its "fair share."
Businesses want to know if the transportation system as a whole will support reliable and predictable, cost-effective, and safe transportation of goods and people from their origin to their destination both today and into the future. They do not want to negotiate among 50 different states and myriad communities. They cannot afford to have a system made up of islands of good transportation in a sea of mediocrity. This sums up why there is a clear federal role in ensuring the national interest is realized in an interconnected, seamless, and efficient transportation system.
MAP-21 Reauthorization: Next Steps
In discussing highway, transit and safety legislation over the years, the Chamber has been clear, consistent, and repetitive on three key points. First, we must get the most bang for the buck out of every federal dollar through good policy and programs. Second, the federal government is not the only game in town; the private sector must play an increasing role in project financing and delivery. Third, the best policy and the most creative financing tools do not do much good without revenues.
Moving Ahead for Progress in the 21st Century made smart reforms to speed up much-needed improvements to our roads and bridges, and public transportation systems; expanded TIFIA, which is the flagship federal credit program for surface transportation; created performance measurement for transparency and accountability; called for establishment of a national highway freight network; and, funded federal-aid programs without significant cuts. MAP-21 has a focused and simplified federal transportation policy framework and program structure. It stopped the diversion of money intended for transportation to non-transportation projects. These changes should enable states and Metropolitan Planning Organizations to implement a sensible mix of projects based on what will work in a given area--more road construction in some areas or investment in public transportation in others, or using technology to improve system management and squeeze out additional capacity from existing assets. Through planning and performance measurement, states and local planning processes and decision-making will be more transparent and agencies will be more also more accountable for outcomes. Together, the historic reforms in MAP-21 should go a long way to restoring trust and confidence with taxpayers who expect their money to go toward the intended purposes.
In this reauthorization, there are opportunities to build on MAP-21, without disrupting the ongoing implementation of the law, will help make the case for action on transportation legislation and on solving the funding crisis. Although this testimony is not focused on policy recommendations, the Chamber is developing suggestions for the
Private Participation & Financing Tools
As a nation, we must do a better job taking every opportunity to tap every possible source of capital so that projects that simply cannot be financed still have resources--including the limited formula and grant dollars that do not have to be repaid.
There is no shortage of private capital ready to be invested.
Capital is not the only reason to pursue private participation in public infrastructure delivery. The private sector can bring innovative problem solving and up-front capital to bear on the nation's most complex, large transportation challenges. P3s have the potential to drive urgent and complex projects forward in order to deliver benefits sooner than under pay-as-you-go models. Significant value can also be derived from private sector innovation and creativity in problem solving, performance measures built into contracts, and long-term collaborative opportunities incorporating operations and maintenance rather than taking the short-term view of design and construction.
Governors and mayors--and other elected decision makers--need to embrace P3s as a way of doing business. Every state should have laws that not only allow, but welcome, private investment. Public sector project sponsors must develop projects that are bankable, e.g. generate revenues in order to pay for projects or have access to dedicated developer impact fees, general tax revenues or special purpose taxes. The process of delivering projects has to be accelerated: barriers to private investment including regulations and administrative processes that make project delivery take far too long should be removed or reformed. Political uncertainty must be reduced. nxxi
Where do federal transportation policies fit into the P3 equation? Federal credit assistance programs, bond proceeds, and state infrastructure banks can bring down the overall cost of capital for projects thereby freeing up cash flows, which draws in private investors.
The Transportation Infrastructure Finance and Innovation Act (TIFIA), which MAP-21 substantially expanded (from
Private activity bonds for surface transportation projects and rail truck transfer facilities were authorized at
These valuable federal credit tools, along with other sources of debt and equity are not free. When a project is financed, revenues are required to repay lenders and investors. Although using alternative procurement approaches like P3s can free up pay-as-you-go funding sources for projects that do not fit into the P3 model, P3s are not substitutes for fixing the revenue problem facing the
In testimony to this committee last September, the Chamber stated, "The issue of sustainable, growing revenue for the federal HTF is central to MAP-21 reauthorization. Over the next 12 months, elected leaders must lay a course for the future of federal investment in highways and public transportation."
The Chamber looks at this challenge in three phases.
. 2014-2015: The impending crisis requiring draconian cuts in order to maintain solvency.
. 2015-2024: During this period, the existing user fees could be modified to be sustainable, predictable, and in pace with inflation. This is also a critical period for conducting an aggressive research and development agenda for a long-term revenue source.
. 2025 and beyond: It is at this point, when CAFE standards increase significantly, that the revenues from gasoline taxes are likely to require substantial replacement as the primary source of funding from drivers.
Action Required This Summer: 2014-2015 Shortfalls
Time is running out to address the immediate problem with the HTF.
Under the baseline scenario, CBO expects outlays from the highway account to total about
Under the baseline, CBO estimates that the transit account will be able to meet all obligations during FY2014, but will be unable to meet obligations at some point in Fiscal Year 2015. Outlays from the account are expected to total about
For FY2015, the conclusion that CBO made in
The 10-year window: FY2015-FY2024
The 2014-15 problems are only the tip of the iceberg. As
According to CBO, if
For the 10 year window, 2015-2024, the cumulative shortfall in the highway and mass transit accounts of the HTF will be over
2025 and Beyond
Looking even farther into the future, by 2025, all new cars and light duty trucks sold must comply with Corporate Average Fuel Economy standards that will dramatically reduce gasoline consumption and, as a result, decimate the excise tax on gasoline as a source of revenue to the HTF. By this point, new revenue sources must be identified, and the collection methods thoroughly tested, so that a different means of collecting user fees can be implemented if user fees are to be the source of funding for highways, public transportation and safety.
Three Paths to Solvency
The three alternative paths in front of
Option 1: Cut transportation programs to levels supported by available revenues.
Trade-off: Approaches of this type simply shift responsibility to states and local communities, which will be forced to raise their own revenues to address transportation needs.
In the last several years,
The Chamber strongly urges
Option 2: Pay to maintain or increase transportation spending with general funds.
Trade-off: This option eliminates the certainty of a multiyear transportation program because contract authority--the ability of a federal agency to incur obligations in advance of appropriations--has been tied, historically, to user fees. Absent sustainable, predictable and growing sources of user fee revenues, the federal transportation programs covered by MAP-21 will have difficulty supporting multi-year capital investments. Since 2008, the HTF relied on over
Although the Chamber appreciates the willingness of
Option 3: Increase existing user fees and/or identify new user-related revenue sources.
Trade-off: Politics and public opinion. The simplest, most straight-forward, and effective way to generate enough revenue for federal transportation programs-- increasing federal gasoline and diesel taxes--is frequently cited as politically impossible.
The Chamber's Preferred Revenue Option:
The Chamber believes that
The gas tax is not dead. However, the current levels--18.4 cents per gallon on gasoline and
The Chamber believes that raising user fees to cover the shortfall and allow for increased investment should not be dismissed. Increases should have been done long ago to make up for lost purchasing power and address unmet needs. The challenge is one of political will. This debate--particularly the revenue considerations it entails--will never be convenient. But matters of convenience are not what Americans ask of their leaders in
Actions by states in 2013 to raise revenue for transportation are examples of this political courage. According to the
Other Revenue Options
The Chamber is open to considering other revenue options to supplement the current HTF revenue sources. In fact, there is no shortage of research that looks at the questions of "who pays, for what, how much, and by what mechanism?" However, the Chamber has not fully evaluated these options and this list is not indicative of options that the Chamber would support.
The two commissions created in SAFETEA-LU,
. Existing HTF sources
. Vehicle-related taxes and fees
. New fuel taxes
. Broad-based taxes
. Freight-related mechanisms
. Tolling and pricing mechanisms
Notably, both commissions rejected the notion that the federal government should get out of the business of investing in highways and public transportation.
. Replacing the current gas tax with a hybrid structure of a variable fuel tax plus a per barrel fee on domestic and imported oil.
. Institute a vehicle-miles-traveled-tax. This option is highly controversial and will not address the immediate challenges.
. Establish surcharges on drivers' licenses and vehicle registration.
. Set new fees for hybrid and other efficient vehicles.
. Expand use taxes to bicyclists, for example, through an excise tax on bicycles.
. Container taxes
. Partial dedicates of customs revenues
. Indexing gasoline and diesel taxes
. Freight waybill fees (either all modes or truck only)
. Freight charges by ton or ton-mile on all modes or truck only
. Increase in Harbor Maintenance Tax
. Heavy Vehicle Use Tax increase
. Partial dedication of individual or corporate income taxes
. Sales taxes on: auto-related parts and services, fuel, or new and used cars and light duty trucks
. Increasing heavy truck and trailer sales taxes and tire taxes
. Instituting new tire taxes for cars and light duty trucks
Among other proposals: House Speaker
None of these options will be the HTF Revenue Holy Grail: a non-controversial, politically palatable, sustainable, predictable, adequate and growing source of user fee revenue for transportation.
This nation is faced with difficult fiscal circumstances; however, federal investment in transportation is vital for economic growth, competitiveness and jobs. A transportation system that supports a 21st century economy requires a high level of investment targeted at improving performance across all modes and across the country. The federal government should not pass the buck to states and locals, nor should it wait for money to grow on trees, or wish and hope that things will get better. Although the management and planning of the nation's transportation system is decentralized and often localized, and public and private, we cannot just fix a few bottlenecks or address the problems in one city or state.
Inaction has costs.
. The economic costs of congestion on the ground, in the air, and at our ports;
. The number of lives needlessly lost to poor roadway conditions;
. The negative impact an aging transportation infrastructure system has on our ability to compete globally;
. The greater costs of materials, labor, and land as projects are delayed;
. The lost opportunity to employ hundreds of thousands of people in construction and related industries by modernizing our highways, transit systems, airports, seaports, waterways, and rails;
. The increased costs and decreased efficiency for American businesses; and
. The hundreds of billions of dollars annually in wasted fuel, lost productivity, avoidable public health costs, and delayed shipments of manufacturing inputs, consumer goods and other items critical to the underlying growth of our businesses.
These things might not "score" for the
As the Chamber testified to the
The Chamber is confident in the case for increasing the systemic funding available for capital investment in infrastructure. As a nation, we must face this fundamental fact--we are a growing people and a growing country with aging infrastructure. We have to fix what we have, and then, if we want a new road, a new runway, or a new transit system, we've got to buy it. No one is giving them away for free....When it comes to funding and financing, every option must be considered to address the enormous problems of the aging transportation infrastructure.
The Chamber is committed to working with the
We call upon all of America's leaders in and out of government to put this country first. America needs big solutions--it is time to put the smallness of politics aside. Transportation is a great opportunity to prove that Democrats and Republicans can work together, that states and the federal government can each play an appropriate role, that business can step up to help meet a major national challenge, and that all stakeholders can come together to get something done for the good of the nation. The Chamber is ready to meet the challenge.
ni Trimbath, Ph.D., Susanne. 2011. "Economic Infrastructure: Building for Prosperity."
nii Trimbath, Ph.D., Susanne. 2011. "Transportation Infrastructure: Paving the Way."
niii Trimbath, Ph.D, Susanne, "Transportation Infrastructure: paving the way,"
nvii Slaughter, Matthew. 2011. "
nxii John, Martin and Rasmussen, Chris. 2012. "Jobs Supported by Exports: An Update,"
nxiii Trimbath, Ph.D., Susanne. 2011. "Transportation Infrastructure: Paving the Way."
nxiv Trimbath, Ph.D., Susanne. 2011. "Transportation Infrastructure: Paving the Way."
nxv Schrank, David; Eisele, Bill; and Lomax, Tim. 2012. "TTI's 2012 Urban Mobility Report,"
nxvi Schrank, David; Eisele, Bill; and Lomax, Tim. 2011. "2011 Congested Corridors Report,"
nxvii Schrank, David; Eisele, Bill; and Lomax, Tim. 2012. "TTI's 2012 Urban Mobility Report,"
nxviii Tisch, Jonathan.
nxxiv Municipal Securities Rulemaking Board. Glossary of Municipal Securities Terms. "Private Activity Bond." http://www.msrb.org/glossary/definition/private-activity-bond-_pab_.aspx. Accessed 2/6/2014.
nxxv "A Second Warning on PABs Shortage." Public Works Financing.
nxxvii Crawley, Kip.
nxxxiii "Modernizing U.S. Surface Transportation System: Inaction Must Not Be An Option," BNA Daily Report for Executives, 2011. http://tollroadsnews.com/sites/default/files/BNApieceJSchen.pdf
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