Putting Some Real Money Behind Transportation

Winter 2022/2023 Issue
By: Robert Dunphy
The $1.2 trillion Bipartisan Infrastructure Law that went into effect in November 2021 includes $70 billion to build and improve the nation’s highways and bridges.

The Bipartisan Infrastructure Law could help improve the movement of products through supply chains.

The Bipartisan Infrastructure Law signed by President Joe Biden in November 2021 will “rebuild America’s roads, bridges and rails and strengthen supply chains by making long-overdue improvements for our nation’s ports, airports, rail, and roads,” according to a White House statement. The $1.2 trillion deal aims to bring long-promised investments to the critical public infrastructure and private networks that undergird the economy. In addition to improving personal travel, it will improve the movement of goods, a critical aspect of the transportation system that gained a new appreciation from the public during and after the COVID-19 pandemic.

The U.S. freight transportation network moves raw materials, intermediate goods and finished products through a complex multimodal system involving more than four million miles of roads, 140,000 miles of freight railways, 25,000 miles of navigable waterways, more than 5,000 public airports, and a vast network of pipelines. In 2017, the Federal Highway Administration estimated that 19.7 billion tons of freight, valued at $18.9 trillion, was shipped within the U.S. However, pandemic-related shipping problems demonstrated that freight challenges are greater than simply alleviating logjams on roads or around ports.

Supply Chains

The public became acutely aware of the complex networks needed to get items from manufacturers to their doors during the early days of the pandemic. Many manufacturers shut down, and many consumer goods were suddenly scarce on store shelves. As the economy reopened, online ordering ballooned, and trucks, ships and planes were filled up. This created some high-visibility logjams, especially in ports.

A Supply Chain Disruption Task Force led by the secretaries of the U.S. Departments of Agriculture, Commerce and Transportation examined these interconnected webs of businesses, workers, infrastructure processes and practices that underlie the sourcing, manufacturing and transportation of goods, which in the past have been largely invisible to consumers. One of the problems the task force identified is the offshoring of manufacturing to reduce production costs, which can create problems for shipping. “Reshoring” of manufacturing is part of the solution, and it is a likely prospect for 70% of manufacturers surveyed by the Thomas Industrial Survey in March 2020.

Improving infrastructure is endorsed as a high priority by 59% of Americans, according to an AP-NORC poll in July 2021 — perhaps a surprising endorsement for a seemingly technical issue. Improving infrastructure has been a long-time priority for the nation’s engineering and public policy groups and builders but had not gained widespread political support.

Congestion More Impactful for Freight

Although reducing automobile traffic congestion has greater political appeal, it could be argued that expediting freight has a greater impact on the economy. A 2020 study by the Metropolitan Council, a regional planning organization for the seven-county Twin Cities region of Minnesota, examined the effects of congestion in that area. It found that the combination of extra fuel consumption, wages for truck drivers sitting in traffic, larger delivery fleets, more truck drivers, higher inventory costs and investments in enhanced transportation logistics generated more than $200 million in costs that were passed on to consumers. These costs could rise more given the dramatic increase in same-day or next-day small-parcel delivery offered by major retailers and grocery stores.

In 2020, the cost of truck congestion nationally was estimated at $11.3 billion in wasted time and fuel, according to the Texas Transportation Institute. Additionally, a primary reason truckers quit is the frustration of dealing with traffic, schedule inconsistencies and delays. The more time drivers spend in traffic, the less they make per hour, and the less free time they have.

A Major Boost for Transportation Funding

More than a trillion dollars in spending sounds like a lot of money for infrastructure, but in fact the nation already spends a great deal on infrastructure, and only $550 billion is for new funding. Most of the legislation recognizes existing funding for a total of $1.2 trillion. The increase in funding for the Bipartisan Infrastructure Act over the next five years is:

  • $70 billion for highways and bridges — a 43% increase
  • $18.2 billion for transit, a 42% increase
  • $13.2 billion for passenger rail, a quadrupling of federal support.

The nation’s transportation network is funded by a range of public and private investment for highways, railroads and airlines, so federal funds must be seamlessly integrated into other programs.

Implementation and Beyond

It might seem that final approval for such a massive infrastructure program reflects a successful conclusion, but it is just the beginning of an extended effort. The challenge now shifts to implementation and, beyond that, a lasting commitment to maintaining and adjusting infrastructure networks to serve demand.

Implementation involves many partners. Since the federal government owns or operates almost no infrastructure itself, it will be essential to work with state and local governments and the private sector. Most of the funding goes to support existing state and local transportation programs, which are populated by projects that have been vetted, facilitating permitting and project development. The federal government could leverage its funding and regulations to influence state and local investments as well as the private sector. Truck parking, for example, is identified as a critical link in goods movement, but it is provided by the private sector and state departments of transportation. The federal government hopes to encourage additional capacity through State Freight Plans required under the infrastructure law.

Using private investment to leverage government funds. According to the Bipartisan Policy Center, this new federal program could be a big boost to the nascent public-private partnerships (P3s) spending, which are currently only 1% to 2% of infrastructure spending in the U.S., compared to 5% to 20% in other developed countries.

Establishing an ongoing program. The Infrastructure Investment and Jobs Act relies on funding from a variety of sources, which the American Association of State Highway Officials noted does not supply “a long-term, sustainable revenue solution for the Highway Trust Fund.” As the buying power of a fixed gas tax declines and a larger share of the fleet becomes powered by batteries, this could become an urgent need. The consensus in the transportation community is that such a program could be funded through highway use fees or taxes per mile driven, policies that haven’t gained substantial political support from either party.

Robert Dunphy is a transportation consultant and an adjunct professor in Georgetown University’s Real Estate Program. He is an Emeritus Member of the Transportation Research Board.

Addressing ‘Alarming Conditions’ in Chicago

Metropolitan Chicago is the nation’s premier freight hub, connecting 25% of all freight trains and 50% of all intermodal trains in the U.S. Trucks account for about one in seven vehicles on Illinois’ interstate highways, with some carrying more than 30,000 trucks each day. Chicago O’Hare International Airport is one of the nation’s largest and fastest-growing air-cargo hubs, while the region has access to the Great Lakes and Mississippi River maritime systems. It is one of the nation’s largest industrial markets, with approximately 1.1 billion square feet of industrial development, and industries that rely on the frequent shipment of goods represent more than one-quarter of all jobs in the region and add more than $158 billion per year to the regional economy.

Despite the importance of the region for freight and passenger travel, neglect of infrastructure and inadequate funding in Illinois and metro Chicago created alarming conditions for the state’s transportation network by 2018, and similar conditions in capital needs for education and public service agencies. This led the state to create a historic Rebuild Illinois funding plan in June 2019 to make $45 billion worth of investments in roads, bridges and railroads over the next six years, as well as investments in universities, early childhood centers and state facilities.

The timing was fortuitous, since this capital funding program will be enhanced by an estimated $16 billion from the Bipartisan Funding Act for roads, bridges, transit, airports and a new electric vehicle program. It is estimated that the new federal funds will increase total funding for roads and bridges in Illinois by 21% and funding for public transit systems by 26% in the first year, a welcome boost to a needed program.