Federal Transit Funding Key to Rebuilding Economy

Posted on February 5, 2009 by Cliff Henke

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[IMAGE]MET0209p18-large.jpg[/IMAGE]Now is definitely a Dickensian moment in public transport. On the one hand, given its high profile and expected infusion of investment, there could be no better time to be in the public transport industry since its heyday in the last century. On the other, many of the same issues that plague the general economy — a credit crisis, unreliable energy supplies, outmoded labor practices and the inability to adjust quickly to sudden market changes — also make it some of the worst of times for transit.

Identified by policy makers in major developed nations to help the global economy in stopping the economic slide and buoyed by local referenda in many U.S. cities in the November elections, the industry is set to receive unprecedented amounts of money. All this occurs at a time when the federal government, after an historic election and ensuing changes in the government’s role in helping to build long-term, sustainable economic growth, is set to renew or possibly even rewrite its surface transportation policies.

That said, the stimulus legislation announced by Congress just before President Obama took office disappointed many. Although some complained that it will spend three times as much on highways ($30 billion) as on transit ($10.1 billion), it is better than the usual ratio that federal programs have followed in recent years. Environmental groups demanded that transit receive equal treatment with highways.

The critics have good reason to feel a little disappointed, however, given the promise of higher expectations leading up to the bill. Intercity rail would get about $1 billion, only 20 percent of what the House Transportation and Infrastructure (T&I) Committee recommended just after the election ($5 billion). Airports would get about $3 billion, just more than one-half of what the T&I committee proposed last fall.

The rapid influx of unprecedented amounts of money presents a pleasant challenge to industry leaders: how to spend it fast enough to achieve these large and very public goals. To that end, T&I Committee Chairman James Oberstar (D-Minn) met with affected industry groups to urge them to get ready and warned them that the money will have to be spent within the 120-day window or be lost to others that meet the requirements. Conversely, the industry also wants to ensure that any investment made as part of the package enacted to help stimulate the economy not preclude further funding increases and needed changes in federal public transportation policy in the U.S.

Money for “ready to GO” new starts, small starts

Absent from the economic recovery package is a proposal for a $60 billion National Infrastructure Reinvestment Bank, an element of the Obama-Biden campaign platform. The final amounts and strategy will likely be reworked by the time you read this, as Congress develops the complete proposal.

However, both the Obama administration and the T&I Committee insist that very little of this new money will be earmarked, meaning that existing formulas will be used for $8 billion of the $9 billion public transportation total, as well as most of highway portions in the stimulus bill. The $1 billion for the New Starts/Small Starts program is for specifically identified “ready to go” new starts and small starts.

By contrast, during the lame duck session of the previous Congress following the election, Oberstar floated an $85 billion infrastructure proposal. It included $12.5 billion for the “ready to go” public transportation projects mentioned above, while $30.5 billion would be provided to highway infrastructure, $3.4 billion to high-speed and intercity rail grants, and $1.5 billion for Amtrak, with the remaining funds going toward other infrastructure investments.

Although it was hoped that a stimulus bill could be enacted and put on Obama’s desk immediately after he took office, it is now more likely to be completed before mid- to late-February. Ironically, this bill will come before a finished Fiscal Year 2009 transportation appropriations bill, which will be taken up shortly thereafter.

Despite state, local success…

Meanwhile, voters across the country have again signaled their support for transportation-related investment. Voters in November approved more than $75 billion in funding for transportation, a success rate exceeding 70 percent, continuing the high batting average that now stretches nearly a decade. In the fall election, 24 measures in 16 states were approved, 18 of which increased taxes to pay for the investments. In total, voters approved more than $75 billion in new transportation related programs.

The largest of these measures were on the West Coast. In Los Angeles County, a majority of voters said yes to a one-half-cent increase in the sales tax, totaling $40 billion over the next 30 years, roughly one-third of which is for public transportation. In Seattle, voters also approved a sales tax increase for Sound Transit’s $17.8 billion plan for 34 miles of light rail and expanded bus service. In California, a $40 billion, 800-mile statewide high-speed rail plan partially funded with a $9.9 billion bond issue was also approved.

The November success also dramatically demonstrated support in a tough economic year. In fact, all of 2008 will go down as one of the industry’s most successful ever at the ballot box, since 12 of 15 such decisions passed in eight states earlier in the year, worth approximately $40 million a year for local transit agencies.

State, local budgets in crisis

These heady victories come at a time when states and cities weather the financial firestorm ignited in 2008. According to figures compiled by the National Conference of State Legislatures, states have already closed a cumulative gap of nearly $40 billion as they prepared their FY 2009 budgets, yet still face another $30 billion chasm that has opened since these budgets were enacted, and a cumulative shortfall of $63.7 billion projected for FY 2010. This deficit will undoubtedly grow because half the states had yet to release budget forecasts for the coming fiscal year, which begins, for most, in June.

More than one-half the already projected amount is in two states: California and New York. It is thus no coincidence that both governors have asked President Obama for a rescue plan for state governments, similar to what has been provided to the financial system and the U.S. auto companies.

Accordingly, the stimulus legislation will waive the requirements for at least a 20 percent funding match by project sponsors. The lack of ability to provide a local share is what many believe to have been a major contributor to the industry’s last recession in 2001, even though there were record amounts of federal transit assistance available then as there is now.

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