Photo credit: Ewillison via Wikimedia

A Roadmap to Job-Creating Transportation Infrastructure

There is broad public concern about the status of transportation infrastructure in the United States. On election night, the future President said “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals.” This report (“A Roadmap to Job-Creating Transportation Infrastructure: Doing the Right Things Right” examines the condition of the nation’s infrastructure and makes recommendations to improve efficiency and effectiveness in federal efforts to support ground transport. Read the full report here (PDF opens in new window)

Infrastructure is important to the accomplishment of such important public goals as increased economic growth, long-term job creation (beyond project employment benefits), a better standard of living, and the reduction of poverty. The United States used to lead the world in infrastructure, but has fallen behind some of its competitors. At the same time, past infrastructure policy in the United States has created an inertia that has prevented serious prioritization of federal resources.

All of this is made more arduous by the nation’s strained finances. The national debt is now approximately $20 trillion while budget deficits continue and could increase without significant reforms. This means it will be difficult to commit additional resources to the nation’s highways and rail systems.

Administration Proposals

The Administration has proposed approaches that go beyond “business as usual”. They would seek to focus federal resources on national and regional priorities, improving both the effectiveness and efficiency of federal programs.

Perhaps the most significant federal program is the Highway Trust Fund, which uses highway user fees to support highway and transit. In recent years, general funds have also been added to the program, because revenues have risen more slowly than needs, in part because of improved fuel economy and low gas prices. The Administration proposes no highway user fee increases and proposes to phase out general fund support.

In addition, the Administration proposes to phase out funding for “new starts,” which are usually expensive urban rail transit programs, because these programs are not of sufficient national significance.

The Administration has proposed increasing funding through programs that attract private infrastructure development and has proposed $200 billion over the next 10 years in infrastructure expenditures, including transportation.

Because there are sufficient travel alternatives, the Administration proposes ending support for Amtrak’s long-distance trains.

The Administration has referred to the necessity of regulatory reform and streamlining permitting requirements, both to reduce costs and to speed project delivery.

Analysis and Recommendations

It is expected that the Administration will propose further initiatives, consistent with the directions it has outlined. The proposals are analyzed below and additional recommendations are offered.

Highways and Transit: The Highway Trust Fund provides most of the federal contribution to highways and transit, from user fees from drivers and commercial vehicle operators, such as the trucking industry. As expenditures have risen faster than revenues, the Highway Trust Fund has received general fund support as well.

The highway system is the country’s most comprehensive transportation system. Autos (including light trucks) using the highway and roadway system account for the overwhelming majority of ground passenger travel, both for commuting and other trips. These roads allow people to commute to jobs throughout metropolitan areas more quickly than any other mode. The employment opportunities available by auto, as will be shown below, dwarf those by any other mode. Perhaps surprisingly, autos provide by far the largest share of commuting by low income populations. Highways provide the infrastructure for much of the freight transport and service vehicles. In the long run, improving access to employment and reducing traffic congestion will be most efficiently accomplished by improvements that involve highways.

By contrast, transit, which has received funding from the Highway Trust Fund for more than three decades, is intensely concentrated in just a few local areas. Only two percent of motorized trips are on transit. Even in the largest metropolitan areas, transit provides far less access to jobs than autos, while new transit rail projects and additional transit funding has failed to reduce traffic congestion.

By virtually any measure, transit is less effective and efficient than highways for passenger travel. Transit moves no freight or other commercial traffic and does not provide emergency service access. Highway Trust Fund revenues should be used only on highways.

Private Finance: The programs the Administration has proposed for attracting private infrastructure capital include the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and US Department of Transportation authorized private activity bonds. As currently designed and operated, these programs do sufficiently prioritize transportation infrastructure. Process reforms are needed to ensure the limited funding available is used for the highest priority projects. Evaluation criteria should be adopted, with traffic congestion relief, critical bridge replacement and highway system maintenance being the highest priorities. Express toll lanes, added to existing roadways, are among the most promising approaches because of their additional capacity and ability to reduce traffic congestion.

Further, the tax exempt financing and interest subsidies of these programs have a federal budgetary impact that increases deficits and the national debt. The Administration should seek to minimize these impacts by ensuring that only the most productive projects are approved.

Another federal credit instrument, the Railroad Rehabilitation and Investment Financing program could impose substantial losses on taxpayers. Despite its success to date, there are now indications that privately sponsored high-speed rail projects will seek large taxpayer guaranteed loans from RRIF. Private, at risk investment has not proven profitable in high-speed rail, which suggests a potential for default, such as what occurred with Solyndra. Program reforms are needed.

Amtrak and High-Speed Rail: It will be important to eliminate unnecessary subsidies. For example, as an Administration document puts it: “communities are served by an expansive aviation, interstate highway and interstate bus network.” In this environment, Amtrak subsidies are unnecessary. Subsidies to high-speed rail are similarly unnecessary.

Regulatory Reform and Streamlined Permitting: The Administration has also proposed regulatory reform and streamlined permitting. Among the most important opportunities are repeal of the Davis – Bacon labor requirements, prohibition of project labor agreements, and setting up a single point of contact in the federal government for project sponsors.

Conclusion: Improving Efficiency and Effectiveness

It will be important to better focus private funding programs on the highest infrastructure priorities, and to minimize serious risks to taxpayers and bond buyers that could emerge from insufficiently vetted projects. The recommendations suggest doing the right things by limiting federal support to genuine needs for programs for which there is no alternative, and doing them right by spending no more than necessary. The sooner the hard choices are made, the better for future generations.

The above is the Executive Summary to “A Roadmap to Job-Creating Transportation Infrastructure: Doing the Right Things Right,” published by the Center for Opportunity Urbanism (author, Wendell Cox, Senior Fellow).

Photograph: Intercounty Connector, Montgomery County Maryland (a TIFIA project). Photograph by Ewillison (Own work) via Wikimedia under CC BY-SA 4.0