Optimism For Bill on Trans­port

The Bond Buyer - - Front Page - By Sarah WyNN

WASHINGTON – A pro­posed in­fra­struc­ture bill has floated around for the last two years, but those in the trans­porta­tion in­dus­try be­lieve 2019 could serve as a unique win­dow to fi­nally push it through.

With a multi-bil­lion gap to fill and the Fix­ing Amer­ica’s Sur­face Trans­porta­tion Act ex­pir­ing in 2020, law­mak­ers and in­dus­try pro­fes­sion­als alike are look­ing for ways to fund in­fra­struc­ture for the long haul. A long-term in­fra­struc­ture fund­ing bill would be wel­comed by the mu­nic­i­pal mar­ket be­cause it would pro­vide a level of cer­tainty about the fed­eral govern­ment’s fi­nan­cial com­mit­ments to states and lo­cal­i­ties as well as po­ten­tially cre­ate new in- fras­truc­ture projects that could be fi­nanced with tax-ex­empt bonds.

“In the last year or two, in­fra­struc­ture is right up there on the top of the na­tional agenda and it nor­mally is not,” said Joung Lee, pol­icy di­rec­tor at the Amer­i­can As­so­ci­a­tion of State High­way and Trans­porta­tion Of­fi­cials. “As long as there is this bi­par­ti­san pri­or­i­ti­za­tion of in­fra­struc­ture, rel­a­tive to all the other ob­vi­ously im­por­tant is­sue ar­eas, I re­main op­ti­mistic that this is some­thing that can ac­tu­ally get done.”

Lee added that a ma­jor ob­sta­cle in the last two years was fund­ing and said in­fra­struc­ture was over­shad­owed by the tax bill. AASHTO asked Congress if they could fix the ail­ing High­way Trust Fund and make it more sus­tain­able while work­ing on its tax leg­is­la­tion, but it didn’t pull through.

The HTF is a fed­eral ac­count fu­eled by fed­eral gas and diesel fuel tax rev­enue. The ma­jor­ity of its spend­ing is in the form of grants to state and lo­cal gov­ern­ments for their sur­face trans­porta­tion projects, and some is­suers use those an­tic­i­pated dis­burse­ments to back Grant An­tic­i­pa­tion Rev­enue (Garvee)

bonds. The HTF has been bleed­ing money for years be­cause the fed­eral gas tax has not been raised since 1993 and more fuel ef­fi­cient and al­ter­na­tive fuel ve­hi­cles are re­quir­ing less fuel for the same miles trav­eled.

Lee said AASHTO also asked Congress to find fis­cal space within the tax bill to fund an in­fra­struc­ture bill, which didn’t hap­pen. Part of the chal­lenge last year, he said was that in­fra­struc­ture placed in the top three along­side a tax bill and health­care ini­tia­tives, but was a far sec­ond from the tax bill.

“This is re­ally in­fra­struc­ture’s turn to shine and get that bi­par­ti­san­ship to­wards a rev­enue so­lu­tion,” Lee said.

Rep. Peter DeFazio will be the new in­com­ing chair of the Trans­porta­tion and In­fra­struc­ture Com­mit­tee in 2019 and plans to have a bill up and ready in the first six months.

DeFazio, an Oregon Demo­crat,has spon­sored what he called A Penny for Progress bill which would in­dex gas prices to in­fla­tion to pro­vide $500 bil­lion in in­fra­struc­ture in­vest­ment.

To pay back the 30-year trea­sury bonds the bill would autho­rize, DeFazio pro­posed in­dex­ing gas and diesel taxes by about one cent per year, with a cap of 1.5 cents per year.

In its first year, the bill could cre­ate an ad­di­tional $630 mil­lion for for­mula and dis­cre­tionary freight pro­grams, $3.2 bil­lion for the Sur­face Trans­porta­tion Block Grant Pro­gram and $85 mil­lion for the Trans­porta­tion and In­fra­struc­ture Fi­nance and In­no­va­tion Act.

The in­vest­ment rep­re­sents a 30% in­crease over cur­rent fund­ing lev­els.

In the end, it will be up to the Ways and Means Com­mit­tee to pass it, DeFazio said at the At­lantic Sum­mit on In­fra­struc­ture and Trans­porta­tion con­fer­ence in De­cem­ber.

Thirty-one states have in­creased the gas tax since 2012, Sen. Chris Van Hollen (D., Md.) said at an En­vi­ron­ment and Pub­lic Works Com­mit­tee in Novem­ber.

Between 2016 and 2025, in­vest­ment needs across 10 in­fra­struc­ture ar­eas to­tal $3.3 trillion. How­ever, planned in­vest­ment into in­fra­struc­ture is $1.8 trillion, leav­ing a $1.4 trillion in­vest­ment gap, ac­cord­ing to the Amer­i­can So­ci­ety of Civil En­gi­neers.

“De­spite these grow­ing needs, fed­eral in­vest­ment in trans­porta­tion and wa­ter in­fra­struc­ture has de­clined sub­stan­tially from al­most 6% of to­tal fed­eral spend­ing in the 1960s to only 2.5% by 2017, said AASHTO Pres­i­dent Car­los Brac­eras at the com­mit­tee hear­ing.

Sen. Tom Carper noted that he, Com­mit­tee Chair­man Sen. John Bar­rasso and other com­mit­tee mem­bers met with Pres­i­dent Don­ald Trump in 2018 to talk about trans­porta­tion and in­fra­struc­ture.

Carper (D., De.) sug­gested to the pres­i­dent to re­store the pur­chas­ing power of tra­di­tional user fees and in­dex the gas tax at four cents a year for four years.

“He cut me off,” Carper said. “He said that’s not enough. It ought to be 25 cents a gal­lon and it should be now. He said I know there will be a lot of po­lit­i­cal push­back for that, but I’ll take the heat for that.”

Brac­eras then added a gas tax could fund trans­porta­tion for the next 20 years.

“Here we’ve learned from both sides of the aisle, pre­sum­ably even from the Pres­i­dent of the United States that if we want to re­build roads and bridges and in­fra­struc­ture, we have to come up with some rev­enue so­lu­tions to ac­tu­ally pay for this,” Sen. Roger Wicker said.

Sen. Earl Blu­me­nauer told the Bond Buyer he was con­vinced that in­fra­struc­ture ac­tion would start to un­fold in the first cou­ple of months in 2019.

Af­ter speak­ing with the Amer­i­can Truck­ing As­so­ci­a­tion, Blu­me­nauer (D., Ore.) said he was com­fort­able with in­creas­ing the gas tax.

“The truck­ers pay al­most half the road rev­enues,” Blu­me­nauer said. “They’re will­ing to pay. Let’s bring peo­ple in, hear what’s hap­pened and put it to­gether right.”

Blu­me­nauer sup­ports leg­is­la­tion that would raise gas and diesel taxes by 15 cents over three years and in­dex both to in­fla­tion, ac­cord­ing to his site.

“I want to get rid of the gas tax af­ter we ad­just it and re­place it with a ve­hi­cle miles trav­eled fee be­cause a gas tax won’t work in 10 years be­cause we’ll have more au­ton­o­mous ve­hi­cles that will all be elec­tric,” Blu­me­nauer said.

Ken Bentsen, pres­i­dent of the Se­cu­ri­ties In­dus­try and Fi­nan­cial Mar­kets As­so­ci­a­tion said he sees an op­por­tu­nity in an up­com­ing in­fra­struc­ture pack­age to ex­pand the al­low­able uses of pri­vate ac­tiv­ity bonds and lift their is­suance caps. Such a change, which the muni mar­ket has sought for years, would pro­vide muni is­suers more flex­i­bil­ity and po­ten­tially boost the num­ber of deals com­ing to mar­ket.

Bentsen added that 2019 could see the re­turn of some kind of di­rect-pay bonds, like the pre­vi­ous Build Amer­ica Bonds which re­im­bursed is­suers 35 cents for ev­ery dol­lar of in­ter­est they paid on the bonds.

Sacra­mento Area Coun­cil of Gov­ern­ments Ex­ec­u­tive Di­rec­tor James Cor­less said dur­ing a re­cent Se­nate En­vi­ron­ment and Pub­lic Works Com­mit­tee meet­ing that if Congress doesn’t in­crease fed­eral fund­ing, that they were go­ing to see “more pres­sure for lever­ag­ing ad­di­tional funds through pub­lic-pri­vate part­ner­ships.”

At the same time, Cor­less warned law­mak­ers not to think of P3s as a sub­sti­tute for fed­eral fund­ing.

“I don’t think a pub­lic-pri­vate part­ner­ship is a way to gen­er­ate rev­enue that is just sort of sit­ting out there, myth­i­cally wait­ing on the side­lines — it’s a way to man­age risk,” Cor­less said. “That’s the real value of P3’s, it man­ages risks.”

Amer­i­can Pub­lic Power As­so­ci­a­tion Se­nior Govern­ment Re­la­tions Di­rec­tor John God­frey said that if Congress does act in 2019, it will be sim­i­lar to the Prob­lem Solvers Cau­cus in­fra­struc­ture re­port re­leased in 2018. In the re­port, the cau­cus pro­posed main­tain­ing the fed­eral tax-ex­empt sta­tus for mu­nic­i­pal bonds and pri­vate ac­tiv­ity bonds, while in­creas­ing the pri­vate ac­tiv­ity bond cap and in­cen­tiviz­ing states to adopt P3’s.

Congress would add pro­pos­als to up­date the tax treat­ment of mu­nic­i­pal bonds, God­frey said.

“I think if Congress does act, it will prob­a­bly be along those lines and some­thing that takes a bit from ev­ery place,” God­frey said.

The Amer­i­can As­so­ci­a­tion of Port Au­thor­i­ties’ fo­cus in 2019 will be on re­form­ing its Har­bor Main­te­nance Tax, said Pub­lic Af­fairs Di­rec­tor Aaron El­lis.

The 1986 tax is col­lected on im­port goods com­ing in from over­seas. Cur­rently, there is a 0.125% tax on goods im­ported, El­lis said.

“It raises about $1.8 bil­lion a year for har­bor main­te­nance,” he said. “Over the years, the money has been di­verted, well it goes into the gen­eral fund un­for­tu­nately so the money has been di­verted else­where in a lot of cases.”

When they can’t main­tain the ports to stay at cer­tain depths and widths, then big­ger ships can’t get in and ship­pers have to use smaller ships which is more ex­pen­sive. Port au­thor­i­ties have wor­ried that U.S. ports who fall be­hind on that kind of main­te­nance could lose busi­ness to ports in Canada or else­where.

The as­so­ci­a­tion wants to see all of the fund­ing go back to the ports and no ad­di­tional taxes.

From a sur­face trans­porta­tion perspective, AAPA Di­rec­tor of Freight and Sur­face Trans­porta­tion Pol­icy John Young said he is op­ti­mistic for 2019.

Young wants to build off the FAST Act. Over­all, he wants more flex­i­bil­ity in fund­ing mech­a­nisms, such as the re­cent Bet­ter Uti­liz­ing In­vest­ments to Lever­age Devel­op­ment (BUILD) grants re­leased in De­cem­ber.

Ports got about 15% of the projects over­all to help with high­ways that lead up to the ports and bridges.

“We’re sup­port­ive of in­creased fund­ing,” Young said. “It cre­ates el­i­gi­bil­ity for freight projects. Cer­tainly, we want to see the RRIF (Rail­road Re­ha­bil­i­ta­tion and Im­prove­ment Fi­nanc­ing) pro­gram and TIFIA (Trans­porta­tion In­fra­struc­ture Fi­nance and In­no­va­tion Act) pro­grams be stronger tools for ports. We will con­tinue to work with leg­is­la­tors, mak­ing sure that that el­i­gi­bil­ity is there.”

Dur­ing the En­vi­ron­ment and Pub­lic Works Com­mit­tee meet­ing at which Cor­less also tes­ti­fied, Vice Pres­i­dent of the As­so­ci­ated Gen­eral Con­trac­tors of Amer­ica Robert Lan­ham said find­ing fund­ing is a pri­or­ity.

“I think we’ve stretched too far with too lit­tle and we’re not com­plet­ing things,” he said.

”If we want to re­build roads and bridges and in­fra­struc­ture, we have to come up with some rev­enue so­lu­tions to ac­tu­ally pay for this” – Sen. Roger Wicker.

In­dus­try pro­fes­sion­als say 2019 may be the year for a long-term fund­ing bill to shore up the na­tion’s over­bur­dened in­fra­struc­ture.

Rep. Peter DeFazio, in­com­ing chair of the Trans­porta­tion and In­fra­struc­ture Com­mit­tee, has spon­sor of A Penny for Progress Bill, which would pro­vide $500 bil­lion.

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