Infrastructure Insights: Issue #2
In this issue:
By: Braithwaite Communications
- Report reinforces need for action on nation’s infrastructure
- House Transportation Chair praises plan to include air traffic spin-off in budget blueprint
- States poised to receive Diesel Emission Remediation Funds as part of VW Settlement
- Pennsylvania Infrastructure big winner in completion of phase-in of Gas Tax increase
- Jacksonville’s decades-old monorail system faces replacement under Transportation Authority plan
Report reinforces need for action on nation’s infrastructure
The American Society of Civil Engineers (ASCE) recently applied a grade to what is near universal agreement on the poor condition of our nation’s infrastructure. Our roads, bridges and other parts of our infrastructure earned an overall, barely passable D+ grade from ASCE in its recently released every four year report.
Politics aside, the key to whether Congress approves a massive investment plan lies in the details of how it’s financed. So far, few specifics are known, just that President Donald Trump has said many times both during the campaign and as president that he wants $1 trillion more invested and wants the majority of the money, if not all of it, to come from a private sector motivated by tax credits.
In addition, House Speaker Paul Ryan (R-WI) has said that any public money spent on the infrastructure will be offset by reductions in spending in other areas of the government. Echoing the President’s position, the Speaker said that for every one dollar in public funds, there should be 40 invested by the private sector.
From the beginning of session, legislative leaders said that any movement on an infrastructure plan would come after an Obamacare overhaul, which failed in the House, and the passage of a tax reform plan.
“The first step to beginning the debate on an infrastructure plan, is the introduction of the plan,” said Robert L. Shuster, Buchanan’s co-chair, State and Federal Government Relations. “The real question is whether it becomes part of a larger package, is combined with a tax package, to generate broader, bipartisan support.”
For years, the highways, bridges and other parts of the nation’s infrastructure have been underfunded due to the falloff in revenue within the Highway Trust Fund.
A 2015 Standard & Poor’s study, in fact, found that government spending on infrastructure as a percentage of GDP had fallen to a two-decade low of 1.7 percent.
On the flip side, the study estimates that for every dollar allocated to public-sector infrastructure, about one dollar and seventy cents is generated and added to real GDP.
The nation will lose on both ends if investment in our infrastructure isn’t increased. ASCE says that the cost in vehicle repairs, lost time on congested and poorly maintained roads, and the lack of investment has “a cascading impact on our nation’s economy.” The U.S. gross domestic product (GDP) could lose up to $4 trillion by 2025 if increased investments aren’t made. Business sales could fall $7 trillion, and 5 million American jobs could be lost, according to the ASCE report.
On our highways, an estimated 3.1 billion gallons of fuel were wasted in 2014 with vehicles stuck in traffic.
Congestion in our airports is also getting worse, but the airports lack the funds to keep up with demand; airports are facing a $42 billion funding gap between last year and 2025.
ASCE also notes that public transit, which includes commuter rail, is underfunded. Despite growing demand, transit faces a $90 billion rehabilitation shortfall.
Finally, four in ten or our bridges are at least 50 years old. Of the more than 614,000 bridges in the U.S., 56,000, or 9 percent, were considered “structurally deficient” last year.
House Transportation Chair praises plan to include air traffic spin-off in budget blueprint
Congressman Bill Shuster (R-PA), Chairman of the Transportation and Infrastructure Committee, applauded President Donald Trump’s call in his budget blueprint to spin off air traffic control (ATC) from the Federal Aviation Administration.
“The budget takes the next step in what our committee produced last year – separating the air traffic control function from the federal government and establishing an independent, not-for-profit organization to provide this service,” Shuster said.
“By removing the ATC function from the FAA, Americans will see a more efficient system, flight times decrease, on-time departures increase, emissions reduced, and 21st century technology deployed to guide our planes from gate to gate.” On top of that, the FAA will be able to focus on safety and robust oversight of the new not-for-profit service provider.
In related news, Terrence Heubert, Senior Advisor with Buchanan’s Government Relations team, noted that the committee has already been at work holding hearings into the future of the nation’s infrastructure: “Building a 21st Century Infrastructure for America.”
“The spinoff is a vital part of improving our infrastructure,” Heubert said. “Just as the condition of roads and bridges has fallen behind other countries, our air traffic system has as well.”
As part of that hearing process, Christina Cassotis, Chief Executive Officer, Allegheny County Airport Authority, testified before the Subcommittee on Aviation on March 1.
Cassotis said that Pittsburgh was among a list of medium size airports that’s getting shortchanged under all three available funding sources: federal grants from the Airport Improvement Program (AIP); locally imposed Passenger Facility Charges, or passenger volume (PFCs); and tax exempt municipal bonds for larger airports.
“Pittsburgh was designed to carry millions more passengers a year,” she said. “Those passengers are gone, because the hubs are gone. But the infrastructure remains. Our facilities are aging, costly and not designed for the local passengers that make up a majority of our passengers today.”
The solution she says lies not in a federal windfall but a fairer distribution of the funds available.
One move would be the elimination of the Significant Contribution under PFC for medium size airports. Another would be that medium hubs not be required to take the same AIP haircut as larger hubs. The PFC must be raised, uncapped, or both.
On the air traffic control front, Airlines for America (A4A) recently conducted a survey that found that nearly 8 in 10 Americans support modernizing ATC to ensure the system can keep pace with modernization efforts as long as the FAA retains oversight of safety.
“Unnecessary flight delays that are often the result of outdated, WWII-era technology and procedures cost the United States and traveling public an estimated $25 billion in 2016 alone,” said A4A President and CEO Nicholas E. Calio. “The benefits of a modernized ATC infrastructure include: enhanced safety, reduced delays, fuel savings, reduced emissions, increased capacity and greater operational efficiency. In addition, a secure, predictable funding stream will remove external constraints that have led to the FAA routinely missing its air traffic controller hiring goals.”
States poised to receive Diesel Emission Remediation Funds as part of VW settlement
In late February, a federal court named a Trustee to oversee the distribution of funds from the $2.7 billion mitigation trust established as part of the VW emission settlement. The money will be spread among the states to fund programs aimed at reducing diesel emissions.
Under the terms of the settlement, the Trustee, Wilmington Trust N.A., approves a state as an eligible beneficiary; the state then has 90 days to submit a mitigation plan for approval.
The amount each state is due is based on the number of 2.0-liter diesel vehicles sold in each jurisdiction. Pennsylvania is due to receive $110 million and Florida more than $152 million of the $2.7 billion. The settlement lists how the money must be used.
“Under the agreement, the states aren’t permitted to spend the money anyway they like,” said Brett Bacot, Senior Advisor with Buchanan’s Government Relations team. “They have some range but the projects must come from that pre-set list.”
The list includes replacing or repowering large freight trucks, ferries and tugs, locomotive freight switches, airport ground support trucks, and other vehicles. The terms also allow augmenting funding under the federal Diesel Emission Reduction Act (“DERA”), a statute with goals and a structure similar to the mitigation outlined in the settlement. Investment in charging stations and other infrastructure projects for zero emission vehicles is also permitted.
In Florida, Governor Rick Scott has named the Department of Environmental Protection (DEP) as the beneficiary, and the Department has released a preliminary plan for the funding. The DEP also included a separate site for submission of proposed ways to use the money.
The Pennsylvania Department of Environmental Protection has likewise created two websites related to the settlement: one contains background information on the settlement; the other contains details on the mitigation trust.
Officials in both states said they are still considering options regarding whether stakeholders will be invited to help develop a plan for spending the funds.
In Pennsylvania, environmental groups have written Governor Tom Wolf asking him to consider funneling the money to the state’s DERA program. The signers include the Sierra Club, Clean Air Council, and the Group Against Smog and Pollution.
“We understand that mitigation trust projects which meet DERA requirements are eligible as state matching funds under DERA,” the letter stated. “Such qualifying projects could increase the amount of money available to Pennsylvania for pollution reduction projects.”
The $2.7 billion available for diesel emission remediation under the VW settlements is far more than the federal government made available over the past nine years under DERA. Congress provided almost $670 million to the DERA program from fiscal 2008 through fiscal 2016, including a $300 million injection of cash through the American Recovery and Reinvestment Act of 2009.
The DERA funding level has never come close to filling the demand for federal aid in upgrading older diesel technology. Funding requests have exceeded grant availability by a ratio of seven-to-one, according to a 2016 EPA report to Congress.
Pennsylvania Infrastructure a big winner upon completion of the phase-in of Gas Tax increase
Pennsylvania has completed the phase-in of an increase in the state gasoline tax and a switch from splitting the tax between the pump and wholesale level. Under Act 89 of 2013 the tax is now levied entirely on the wholesale level. The payoff is big for both state highways and bridges and those under municipal control.
“With the decrease in the amount of federal dollars for transportation projects, Act 89 has been a big win for Pennsylvania residents, businesses, and the highway constructors and other contractors, who have employed thousands in road, bridge and other infrastructure projects,” said Andrew J. Giorgione, who co-chairs Buchanan’s gaming and public-private partnership groups.
In just one example, 20 bridges across Lancaster County are slated to be replaced in 2017 under a public-private partnership. The program is part of PennDOT’s Rapid Bridge Replacement Project, which was launched after Act 89 was signed into law.
In total, PennDOT will spend $2 billion on road maintenance and highway and bridge projects over the next decade.
The Department said that half of the state's 40,000 miles of interstates are out of cycle for their 40-year reconstructions, and of the 2,691 bridges maintained by PennDOT, almost 40 percent have exceeded their 50-year design life. The funds will also cover some of the costs of resurfacing about 18,000 miles of state owned roads, 24 percent of which haven't been upgraded in more than 20 years.
Of the $2 billion available for the Road Maintenance and Preservation program, $500 million will be allocated to interstate preservation and reconstruction. Another $600 million will be available for rehab and reconstruction projects to be used at PennDOT's discretion.
On the local level, the full phase-in of the gasoline tax implementation enabled PennDOT to distribute nearly $466.2 million in liquid fuels payments to certified municipalities on March 1 to help them maintain their roads and bridges.
This distribution marks a $20.9 million, or five percent, increase over the $445.3 million distributed in 2016. In 2013, before Act 89 was enacted, municipalities received $320.8 million in liquid fuels payments.
Liquid fuels allocations are annual payments to municipalities to help pay for expenses such as snow removal and road repaving. There are 120,091 miles of public roads in Pennsylvania, with 72,856 of those miles owned by municipalities that are eligible for liquid fuels. The formula for payments is based on a municipality’s population and number of miles of locally-owned roads.
To be counted as eligible for liquid fuels, a roadway must be formally adopted as a public street by the municipality, meet certain dimension requirements, and be able to safely accommodate vehicles driving at least 15 mph.
The completion of the phase-in of the new tax means that Pennsylvania, at 58.2 cents on the wholesale level, now has the highest gas tax in the nation according to Gasbuddy.com.
PennDOT insists the tax places Pennsylvania in a better position than most states, likewise faced with declining federal funding and aging roads and bridges. The help is doubly needed in Pennsylvania since it has one of the largest and oldest transportation infrastructures in the country. With 40,000 miles of paved roads, it has the fifth largest highway system in the country and it ranks third, at 25,000, in the number of bridges.
Jacksonville’s decades-old monorail system faces replacement under Transportation Authority plan
On March 9, the Jacksonville Transportation Authority (JTA) hosted a demonstration of driverless vehicles, which resemble mini buses, as part of a plan to enlarge the service area of the nearly 40 year-old downtown monorail system, Skyway.
The JTA said that initial plans for the Ultimate Urban Circulator Program, or U²C., includes a service area reaching far beyond Skyway’s limited downtown service area, which comprises two routes across 2.5-mile (4.0 km) of track, serving eight stations, and crosses the St. Johns River on the Acosta Bridge.
JTA has yet to establish a timeline for starting work on the new transit system; that date will hinge initially, of course, on federal and state approval of autonomous cars. It’s also unclear how the new system will be funded, although JTA Chief Executive Officer Nathaniel P. Ford Sr., did say at the demonstration that the U²C plan includes using existing investments in Skyway.
“By all accounts the JTA is working hard to integrate what will likely be a driverless service into the larger public transit plan,” said Marnie George of Buchanan’s Government Relations team.
Funding for Skyway comes in part from the JTA and from Federal Transit Administration (FTA) funding under the state-of-good-repair program for maintenance.
In 2016, it cost $6.3 million to operate Skyway, and it supported 1.18 million trips. In 2013, Skyway became free to ride.