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February 2013

Future Federal Policy Will Depend On Available Resources

Moving Ahead for Progress in the 21st Century (MAP-21), the new U.S. surface transportation assistance law signed by President Barack Obama this past summer, modestly increases federal highway and public transportation funding, but high hopes that this modest response to the growing need is more than made up for by how the new law streamlines, restructures and simplifies how the money will be distributed. Much of the money will have to come from general funds, and in this era, that means deficit spending. It remains to be seen, however, whether deficit reduction negotiations, which were unresolved at press time, will affect the two-year, $105 billion MAP-21 authorized — or, absent a long-term strategy, how funding will be affected beyond MAP 21.

What must Congress address as it grapples with the federal role in public transportation in a constrained fiscal era? Part of the answer lies in how MAP-21 addresses those issues, which is where we begin.

MAP-21 a mixed bag
As with most bills, the new law is a mixed bag of blessings and disappointments. MAP-21 eliminated earmarks, which plagued the law that preceded it and made “bridge to nowhere” a household phrase. However, it largely funded both highway spending and public transportation assistance at the same total levels as Fiscal Year 2012, which represents both aversion of what could have been a program disaster as well as a lost opportunity to better address what has been a consensus about the huge need for U.S. transportation infrastructure investments. It also kicked the revenue can down the road, despite the consensus on the need for new taxes to pay for and stabilize a larger investment program.

Federal transit assistance is authorized at nearly $10.6 billion in FY 2013 and $10.7 billion in FY 2014. Almost $8.5 billion of these amounts will come from the Mass Transit Account of the Highway Trust Fund in FY 2013 and $8.6 billion in FY 2014; $2.1 billion will come from the General Fund in each of these years again, meaning partially deficit spending. Of those totals, $1.9 billion is authorized each year for the Major Capital Investment Program (New Starts and Small Starts).

The new law consolidates many of the previously authorized programs and creates a few new ones. While both the New Starts/Small Starts programs as well as Formula Assistance continue, Very Small Starts, which was only part of Federal Transit Administration (FTA) regulation anyway, and never part of any statute, is wrapped into Small Starts. Importantly, though, both small and “big” starts are not yet separated in the Major Capital Investment Program as they were in the previous legislation. However, Congress has indicated it will set aside $150 million from the program for Small Starts when it gets around to passing a technical corrections bill later this year.

TIFIA gets a boost
A major increase in federally-backed loans, through the Transportation Investments Finance and Innovation Act (TIFIA), could help stretch the federal dollars further, particularly “self-help” regions that dedicate transportation funds through voter-passed measures by bonding against future revenues to build out transit projects faster, as it has already done for several rail projects. MAP-21 includes $750 million for the TIFIA program in 2013 and $1 billion in 2014. It is estimated that the $1 billion TIFIA authorization will support about $10 billion in actual lending capacity.

There is concern, however, that most of that additional lending authority could be already spoken for by highway needs. Of the 27 projects that have filed letters of interest with the U.S. Department of Transportation (U.S. DOT) at press time, all but five were road and bridge projects, some of which are quite large, such as for the Tappan Zee Bridge in New York.

Furthermore, the framework for the expanded loan program has been changed to one that is more of a first-in/first-out process and puts previously rejected loans, if deemed creditworthy, first in line. Although U.S. DOT officials have suggested that there will be some “national interest” test applied to the loans as well, it is too early to tell how all of it will play out post-MAP-21. In addition, MAP-21 also mandates a 10% “set-aside” for rural projects, but again, that expanded eligibility for smaller projects may be offset by the increase in the share of project costs that TIFIA is allowed to support.

Another important MAP-21 provision is a new framework for measuring and improving transportation performance. To develop implementation rules for these new provisions, the U.S. DOT and FTA have already begun a series of webinars and listening sessions. Asset management and performance studies have been funded in several research projects, and it is expected the U.S. DOT and FTA will use this guidance for new rulemaking.

It is worth noting here that flexible funding from highways to transit in recent years has declined, partly as local and state highway funding has been reduced in the wake of the financial crisis that left so many city, county and state budgets devastated. As local government budgets recover, it remains to be seen whether flexible funding will return to the nearly $1 billion average that public transportation once enjoyed each year, or whether the additional performance and other requirements of MAP-21 will keep these dollars in the highway program.

MAP-21 also eliminated the consistently over-subscribed Transportation Investment Generating Economic Recovery (TIGER) program that was begun in the 2009 stimulus and continued in subsequent appropriations. However, the new law authorizes $500 million in a Projects of National Significance Program from the general revenues — but subject to an appropriation in FY 2013 only, which has yet to be enacted — to fund critical high-cost surface transportation capital projects that will accomplish national goals, such as generating national/regional economic benefits and improving safety. Many streetcar, rail and bus rapid transit projects benefited from TIGER, but it is unclear whether this new program will even get started before MAP-21 expires.


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