Transportation Reauthorization Needs Long-Term Funding Solution

Summer 2012

The last multi-year transportation reauthorization, known as the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), was originally passed as a bi-partisan bill in July of 2005. The reauthorization, which provided funding for our nation’s transportation projects, was widely seen at the time as a step in the right direction, though critics claimed that it was woefully underfunded to meet the growing needs of our infrastructure.

Fast forward to 2012, SAFETEA-LU, which has seen 10 extensions since it originally expired in August of 2009, still serves as the blueprint for the funding of our nation’s transportation needs. Despite calls by transportation experts that forecast a minimum need of $500 billion just to maintain and repair our existing infrastructure, Congress has yet to accept any substantial funding solutions that would come close to those projected costs.

Widely seen as a jobs creator and an engine for economic growth, increased investment for transportation projects has been championed by Democrats, Republicans and numerous business interests, including the U.S. Chamber of Commerce. Unfortunately, while there is wide spread agreement on the need for increased funding; there is little agreement on where that funding should come from.

The federal government pays for projects and programs authorized in the transportation bill from the Highway Trust Fund (HTF). The primary source of funding to support the HTF comes from the federal gas tax. When the HTF runs low on funds, Congress typically transfers large sums of money from the general fund to offset the disparity and keep it solvent. This has occurred several times in the past few years, underscoring the fact that the current gas tax is not capable of sustaining enough funds to solve the country’s transportation needs.

The two major proposals that have been debated in Congress to boost the coffers of the HTF are: 1) raising the federal gas tax; and 2) creating a new vehicle-miles-traveled tax. Both of these proposals, which have their own merits, are generally considered impossible lifts. Republicans have been adamant that new taxes to support infrastructure are non-starters for negotiations. With few other options on the table, Congress has been unable to pass a new, long-term transportation bill.

Rather than tackle this issue, Congress has repeatedly punted with a series of extensions. Lately, however, there has been increased political will to move forward with something that will provide a few years of certainty for new transportation projects. Being an election year, there is an increased desire to show the voting public that Congress can accomplish the business of the people. That being said, there are still more disagreements than solutions on how to move forward.

The Senate has taken the lead on this issue by passing a two-year reauthorization bill, with funding levels similar to SAFETEA-LU with a bi-partisan vote of 74-22. To balance the costs of the bill and index it to inflation, Senate leaders used non-controversial pay-fors to come up with an additional needed $12 billion. These include shifting money from a trust fund for leaking underground storage tanks and removing a tax credit for a bi-product known as black liquor that is derived from making paper products and can be used as a bio-fuel.

The House, which rarely follows the Senate’s lead on these types of issues, introduced their own, much more aggressive, plan. Chairman of the House Transportation and Infrastructure Committee John Mica (R-FL) offered a five-year plan to compete with the Senate-passed bill. The pay-fors for the bill proved to be as controversial to most Democrats as raising the gas tax is to Republicans. Opening up the Alaska National Wildlife Reserve (ANWR) to drilling was touted as a responsible way to increase revenue for the transportation bill without raising taxes. This, along with other policy decisions, including decoupling transit funding from the gas tax, proved too big an obstacle to overcome. The bill died before it could ever be brought to the floor for a vote.

Faced with overwhelming odds against finding enough votes to pass the House plan, Speaker of the House John Boehner (R-OH) decided to pass another extension with a few policy riders that would attract the conservatives in his caucus. That extension is now being used as a vehicle to force a conference with the Senate to hopefully produce some sort of final agreement that can be eventually signed into law.

As a top priority for NAIOP, we have been working with leaders in both parties to educate them on the importance of passing a long-term reauthorization bill. NAIOP believes that increasing federal transportation and infrastructure funding is a critical component of a thriving real estate industry and national economy. The success of commercial real estate projects depends heavily on infrastructure investments and viable connectivity strategies that incorporate different modes of transportation, including highways, roads, air, rail and mass transit.

NAIOP supports the following priorities and has asked Congress to include them in a reauthorization bill:

  • Prioritize projects that improve infrastructure to support trade, drive economic development and create permanent jobs;
  • Increase funding for public transportation within and among urban centers;
  • Develop expedited project permitting processes;
  • Establish tax incentives that encourage private investments for infrastructure improvements; and
  • Make additional investments to maintain and build our critical multi-modal and supply chain assets.

As of press time, no final deal has been reached and House and Senate leaders are preparing for what is hoped to be a final negotiation. Faced with limited funding options and plenty of partisan disagreements, even if Congress does pass a bill, it will likely only delay the long-term funding problem.

In order to solve the Nation’s transportation needs, NAIOP believes that two items need to be the cornerstones for any agreement: 1) a long-term reauthorization; and 2) significantly increased funding. Unless these two items are addressed, it is a fair bet that solutions for today’s transportation problems will not be achieved any time soon, and that this debate will continue until a more lasting solution can be agreed upon.