Following more than 25 extensions since SAFTEA-LU expired in 2009, President Barack Obama signed the first long-term surface transportation bill in 10 years in December, the Fixing America’s Surface Transportation Act (FAST Act).
The five-year, $305 billion bill increases funding for Federal Transit Administration (FTA) programs from $11.789 billion in Fiscal Year (FY) 2016 to $12.592 billion by FY 2020, or $61.113 billion over the life of the bill, representing a 10.23% increase in year one, and 17.74% by FY 2020. The General Fund portion of the authorization increases by 16.28% in FY16 and remains flat for the remainder of the bill.
To fill the gap in Highway Trust Fund monies, the FAST Act includes approximately $70 billion in revenues to be transferred to the fund by reducing interest rates paid by the Federal Reserve to large banks, selling oil from the Strategic Petroleum Reserve that is used to prevent energy crises and increasing fees for customs processing.
METRO spoke to several public transportation officials to discuss some of the key takeaways following passage of the long-awaited and much-needed bill.
1. It’s a long-term bill…
When passed in June 2012, the 27-month Moving Ahead for Progress in the 21st Century Act (MAP-21) was designed to buy time for Congress to come to terms on a long-term surface transportation bill, which was a major priority of the Obama Administration. After several extensions of that bill, it began to look like the major hurdle to passing a long-term bill — a dedicated funding source to keep the Highway Trust Fund whole — would never be found. While that source was still not necessarily identified, the industry is excited to finally have a long-term bill in place after years of uncertainty.
“Leading up to its passage, we advocated very hard at various levels, including through the American Public Transportation Association (APTA), to push it forward, so as an industry we are all very happy to have a long-term bill,” explains Los Angeles County Metropolitan Transportation Authority (Metro) CEO Phil Washington, who as chair of APTA organized last May’s nationwide Stand Up 4 Transit campaign. “Federal investment is really the third leg of a three-legged funding stool, with the other two legs being local investment and the private sector, which the industry needs to move ahead with long-term planning and capital project investments, so we are happy they made the leap.”
Adds Peter Varga, CEO of Grand Rapids, Mich.-based The Rapid: “What the FAST Act means for us is that we can finally do some long-term planning. We have a number of projects in the works that are dependent on multi-year funding. We can move forward much more confidently now, because we have a map of what the next five years will look like.”
While the passage of the bill was a surprise to some given the current state of contentiousness on Capitol Hill, there was quite a lot of movement throughout the year by Congress to move toward finally getting the FAST Act passed before November’s elections, not to mention its recent history of supporting the nation’s transportation and infrastructure needs, explains Robert Puentes, sr. fellow with the Brookings Institution’s Metropolitan Policy Program.
“When looking back at 2015, the narrative now is that maybe it was the year Congress finally got its act together, but this is something that has not just been bipartisan but nonpartisan,” he says. “In the last few years, for example, when Congress was widely derided for not functioning at all, infrastructure and transport was one of the things that were actually focused on, which can be seen through the passage of the Amtrak bill, FAA reauthorization and MAP-21.”
2. …but it is basically status quo
“The FAST Act was basically an effort to get a bill finished and put this issue in the rearview mirror, so Congress could move into the election process and point to something as proof to the public that it could still get something done,” says Jeff Boothe, president Boothe Transit Consulting LLC.
“From a policy perspective, it doesn’t look out into the future. You can contrast this with what the Administration, as well as a lot of cities and states are looking at, which is, here is where we are today, here is where we want to get to and here are the mass of changes that are happening right now — demographics, technological, environmental, economic — but none of this is really part of this bill,” says Puentes. “The federal transportation program has been criticized as a general purpose cash transfer program and this is just another example. It doesn’t do anything to dissuade you from that argument.”
Varga and others are disappointed that the FAST Act doesn’t actually layout a plan to move the nation’s transportation and infrastructure forward the way other long-term bills have in the past.
“The one thing that is missing is the recognition of the need for a solid, sustainable funding source for transportation infrastructure investment. While we are excited about the progress in the FAST Act, previous bills provided a leap forward. This feels more like a half-step,” he says.
Boothe adds that Congress’ unwillingness to provide clear guidance for some of the programs the FAST Act creates or continues is an interesting choice given its history with the FTA.
“For a Congress that’s been reticent to give the FTA authority, a tremendous amount of discretion has been left to the agency, because Congress provided very little direction on how many of these projects should be setup,” he says. “For example, with the Bus and Bus Facilities program, there is no guidance in the bill, they just want transparency. There is no direction as to what criteria should be considered or how those decisions are made; all they want is a transparent process.”
On the flipside, Boothe explains that it is a positive that this is the first time the nation has a fully-integrated surface transportation bill that includes highways, transit, freight and passenger rail.
“One of the silver linings of the bill is that it allows a big picture look at surface transportation and allows us to see how the investments work together, so that we can develop an investment strategy with all the programs on the table,” he says.
3. Onus on states, localities
Overall, the FAST Act continues the recent trend of extending the obligations for states and localities to raise their own funds to address some of the more immediate issues, such as demographic shifts and technological advances, including implementation of green-vehicle technologies like electric buses.
“Seeing what the Federal government’s role will be over the next few years and that this is the best they are going to do, states now know that it is up to them to raise the revenues, and put together whatever mechanisms they will need, to be sure they are picking the right projects to invest in,” says Puentes.
There are cities, such as Los Angeles’ Metro and Denver’s RTD, that are already set to take on the challenge thanks to voter-approved tax initiatives, which continue to have about a 75% success rate nationwide.
“Regions across the country are going to invest in themselves, the way we have here in Los Angeles County with Measure R,” says Washington. “We also have to continue to remind the federal government that these investments are important to taxpayers at a local level, and therefore, should be given a bit more importance on a federal level.”
To continue to help boost transportation and infrastructure, Washington adds that Metro is set to go back to taxpayers to ask for another half-cent sales tax increase to extend the 30-year Measure R sales tax increase passed in 2008 all the way up to 2057.
Ideally, Washington adds that he hopes that the federal government will eventually take the hint and build a long-term transportation bill that is more akin to the 15- to 30-year plans that are often implemented in states and localities around the U.S.
“When regions around the country are planning for up to 30 years, to call this bill and the others before it long-term is very disappointing,” he says. “I know it’s been the norm in Congress, but it would be nice to have a plan that really was a long-term plan.”
As for the current trend for states and localities to raise taxes to help pay for transportation projects, Boothe wonders if there is a point where the envelope gets pushed too far and voters begin to find the initiatives intolerable.
“Congress is not carrying its weight. They are not doing their part in terms of making sure that surface transportation in the U.S. is being maintained, and have instead put the onus on states and localities, and I wonder what the long-term effect of doing that will be,” he says. “Especially in states that already have fairly high sales or gas taxes, when do we hit that theoretical threshold where the fees just can’t be raised anymore or the voters begin to resist more tax increases?”
4. Still no funding solution
The biggest issue with the FAST Act from the public transportation industry’s point of view is the fact that there was still no dedicated funding source identified to provide the necessary funds to the Highway Trust Fund. The bill instead uses a variety of sources to create approximately $70 billion in one-time revenues to fund the bill.
“It is very concerning to me that the FAST Act uses one-time revenues that are not going to be available again when the bill expires in 2021,” says Washington. “If I were to use that strategy here at Metro it would be an issue.”
“As a result of kicking the can down the road, Congress has left the program in a situation where it is going to have to climb out of a very deep hole in 2021,” adds Boothe. “At some point in time, we have to address the issue of how to fund the program long-term. Using General Fund bailouts is definitely not a long-term solution.”
Paying for the bill calls for taking $53.3 billion from the surplus of the Federal Reserve Bank and another $6.9 billion to reduce the dividends that are paid to banks who are members of the Fed. Other funding sources in the measure include $6.2 billion from the sales of reserved oil, $5.188 billion from customs fees and $2.4 billion from a move to require the IRS to use private tax collection companies.
5. Working for 2021
Since there was no sustainable funding source identified to pay for the FAST Act, the public transportation sees an opportunity to continue to urge Congress to find one before the new bill expires.
“We will continue to push Congress and hopefully they will be receptive. It’s important to note that finding a sustainable funding mechanism is not just an issue for public transportation, but also for our partners on the highway side, so we will continue to work together,” says Robert Healy Jr., VP, government affairs, for APTA. “On the positive side, we’ve already had leadership, including Rep. Bill Shuster (R-PA), talking about a desire to begin the process of looking for a long-term mechanism.”
Like many in the industry, Varga still believes that raising or indexing the gas tax, remains the most viable option.
“Transportation infrastructure investment is a federal responsibility. It has been historically viewed that way— and supported — by both Republicans and Democrats,” he says. “I think we are missing a real opportunity with gas prices being so low. This is the time to make changes that will be more-easily absorbed and that will have a significant benefit the nation long-term. Without solid infrastructure, our ability to move people and goods is compromised. We need to look at the big picture and make sure we are investing in things that boost the economy and keep America competitive.”
Washington adds that the industry will continue to push Congress to understand the importance of not only a sustainable funding mechanism, but the important role public transportation plays in the big picture. Ultimately, though, he feels it comes down to political will.
“What you have is folks in Congress that concentrate on their districts, but what we’re talking about is making transportation and infrastructure a national priority,” says Washington. “What that means is Congress has to come together as a body, like we did in the Roosevelt years. It’s really just a matter of political courage. We are not asking them for all the money to build infrastructure, we’re just saying we’re going to need them to do their part.”