In summer 2002, elected officials, state governors and DOTs, and private sector leaders agreed that lots more money -- perhaps as much as $50 billion a year -- needs and can be part of the next surface transportation bill.

And even more money -- perhaps $60 billion by FY 2009 -- is possible, as demonstrated by the American Road & Transportation Builders Association (ARTBA) at a July 16 House subcommittee hearing on the long-term viability of fuel taxes for needed Highway Trust Fund revenues.

There, industry leaders said that as the nation begins to move away from petroleum-based vehicles -- toward ethanol and renewable-fueled conveyances -- the gas excise tax-based foundation of our Highway Trust Fund is going to have to evolve as well, or else surface transportation funding will be profoundly shortchanged. A new plan is needed.

The existing Transportation Equity Act for the 21st Century, TEA-21, will expire Sept. 30 of next year, so replacement legislation must take effect Oct. 1 of that year or federally funded road construction and maintenance will be seriously disrupted.

At this time, industry interests are jockeying for position to make sure their needs are represented in the House, Senate and Bush administration versions of replacement legislation being drafted at this time (see Green Advocates Seek Monumental Change in U.S. Surface Transportation Policy, and Industry, Legislators Hustle to Restore TEA-21 Funding).
 

'Two Cents Makes Sense'

In July, at the House Subcommittee on Highways and Transit hearing, 
ARTBA president Pete Ruane testified that more efficient cash management of the Highway Trust Fund -- along with small annual increases in the federal motor fuels excise taxes of two cents or less per year -- could result in incremental increases to a $60 billion/year program by 2009. That virtually would double the record $32 billion federal investment this year under the existing TEA-21 legislation.

The Associated General Contractors observed this is equivalent to a 12-cent federal gas tax increase over six years, phased in with 2 cent increases each year.

The finance program outlined by Ruane in testimony before the subcommittee would ramp up federal highway investment by $5 billion per year, reaching $60 billion in FY 2009. Over the same period, mass transit investments would ramp up to $14 billion.

ARTBA pegs its investment targets to the levels it anticipates the U.S. Department of Transportation and the American Association of State Highway and Transportation Officials (AASHTO) will report later this year are necessary just to maintain current safety, traffic congestion and system physical conditions.

"Two cents makes sense," Ruane said, uttering a battle cry. "The reality is without a new or expanded revenue stream, the purchasing power of the federal highway program will be less in 2009 than it is this year. It boils down to a question of political will and doing things more efficiently."

Moreover, a Zogby International poll of 1,025 registered voters, commissioned by ARTBA and conducted July 9-11, found 67 percent -- almost equally divided between Republicans and Democrats -- would support an annual two-cents-per-gallon increase in the federal gas tax if the revenue is used exclusively for highway, bridge and mass transit improvements.

And nearly 70 percent  believe the nation is facing a "transportation capacity crisis." Sixty percent said highway and mass transit investment should be a higher federal priority than it is now.

The clamor for a $50 billion/year program is underscored by the 1999 U.S. DOT's Status of the Nation's Highways, Bridges, and Transit: Conditions and Performance report, which said a $50 billion-per-year federal highway program is necessary simply to maintain current system conditions and performance levels from 2004-2009.

And in the second week of July, AASHTO president Brad Mallory outlined AASHTO's plans for reauthorization, calling for a federal-aid highway program to grow from $34 billion to at least $41 billion over six years, and a transit program increasing from $7.5 billion to $10 billion.

Speaking in Washington, Mallory, PennDOT secretary, said the industry is advocating a highway program of $50 billion and a transit program of $14 billion, and that AASHTO concurs in the need for such investment levels, and will would work with them and with Congress to achieve the highest funding possible.
 

Administration opposes tax increase

Earlier, in June, a National Conference on Transportation and the Economy June 25 in Washington, D.C. was sponsored by ARTBA on the occasion of its 100th anniversary, and was co-sponsored by AASHTO and the U.S. Chamber of Commerce. The conference was followed by a gala black tie dinner at which former New York City Mayor Rudy Giuliani was guest speaker.

At the conference, industry experts spoke on the value of transportation as an economic multiplier and as a facilitator of business. But just as significantly, luminaries from the Bush administration and both houses of Congress described scenarios for reauthorization of federal surface transportation programs.

There, U.S. Secretary of Transportation Norm Mineta said the Bush administration would not support a gas tax increase in next year's surface transportation reauthorization.

However, that afternoon Congressional leaders said they would consider just that -- via indexing or flat-out increase of fuel taxes -- to guarantee the kind of surface transportation infrastructure the nation will need in the coming years.

Instead, Mineta outlined certain objectives of the Bush II administration for reauthorization, including adequate and reliable funding protected by budgetary firewalls, and with the funding flexibility as with the existing TEA-21. The administration will release its version of the bill in February.

Mineta also demanded an intermodal bill and one that incorporates transportation system security. He also wants the innovative financing pioneered in the predecessor legislation of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and continued in TEA-21.

And he articulated the need for safety enhancements, especially in work zones, for which the Federal Highway Administration (FHWA) has been laying the ground work (see FHWA Includes Driver Mobility in New Work Zone Regulations).
 

Petri wants up to $50 billion

Also at the June ARTBA conference, House Highways and Transit Subcommittee chair Rep. Thomas Petri (R-Wis.) called for an annual highway and bridge program of $40 billion to $50 billion.

To finance this high level of funding he said he'd consider a gas tax increase or indexing the tax to inflation, or other means, to boost income to the Highway Trust Fund. That's needed because, Petri said, the current federal 18.4-cent per gallon gas tax drop to 13.5 cents in real purchasing power by the end of the next reauthorization cycle, due to inflation.

Kentucky Gov. Paul Patton -- incoming chairman of the National Governors Association -- concurred with Petri's call for higher funding. "Some say that this country's [highway] transportation system needs are as large as $50 billion annually," Patton said. "It was good to hear the chairman [Petri] mention that figure as a goal."

But he said that a national gas tax increase would be problematic, as the majority of states are in dire need and governors have had poor results in getting state gas tax increases to ease the shortfall. "We must take other approaches to stretch our highway funds more effectively," he said.
 

Recapture ethanol 2.5 cents

Enhanced funding alternatives posed by Petri included recapture of the 2.5-cent ethanol tax for the U.S. General Fund. Federal tax policy which encourages the use of ethanol-based motor fuel (gasohol) reduces funds available for the nation's highway improvement program by about $1.1 billion per year.

A motorist purchasing gasohol (with 10 percent ethanol) pays a 13 cents-per-gallon federal excise, compared to 18.4 cents per gallon that a pure gasoline user pays, ARTBA reports.

Of the 13-cent gasohol excise, 2.5 cents is deposited in the General Fund. The combination of the 2.5 cents-per-gallon General Fund contribution and a 5.4 cents-per-gallon tax incentive for gasohol reduces deposits to the Highway Trust Fund Highway Account by 7.9 cents per gallon, or about $1.1 billion per year.

The industry preference is for Congress to redirect that 2.5 cents per gallon of the federal tax on gasohol from the General Fund to the Highway Account as a user fee. This move would generate about $400 million per year for additional highway and bridge improvements. Elimination of the 5.4 cents per gallon break can come later.
 

Senate: No bill at current levels

While not explicitly endorsing a TEA-3 program with funding as high as $50 billion/year, Senate Environment and Public Works Committee Chairman Jim Jeffords (I-Vt.) admitted that just maintaining the system could run as high as $55 billion per year, and called for more funding.

"Today we spend about $32 billion per year in our highway program at the federal level," Jeffords said. "We cannot pass a reauthorization bill at current funding levels. While I am not prepared to endorse a specific strategy today, I remain open to the full range of options."

At the conference, Jeffords listed asset management the first of six items he wants reauthorization to cover.

"In recent years," Jeffords said, "state DOTs have spent over 75 percent of their Interstate program funds on system preservation. We should continue this trend of Interstate maintenance ... we should focus on the system's performance and insist that it is well operated, so that we realize the full return on our investment."

Jeffords' position dovetails with the mission of the Foundation for Pavement Preservation (FP2), which has launched a new National Initiative for Pavement Preservation in advance of TEA-21 reauthorization. FP2 (http://fp2.org) wants to bring the preservation concept to state DOTs and other road agencies via a national platform.

FP2 defines roadway "asset management" as a systematic process of maintaining, upgrading, and operating physical assets cost-effectively, combining engineering principles with sound business practices and economic theory. It underlies today's emphasis on pavement preservation.

However, the road industry at-large will be careful to make sure the main thrust of TEA-3 funding is not diverted from capital improvements into asset management and pavement preservation, which is a goal of the environmental movement.

Somewhat ham-handedly, Greens are trying to codify "fix it first" as a way of precluding the building of new capacity. Jeffords has identified himself as an environmental advocate and will seek to inject environmental aspects into the coming TEA-3.

Other reauthorization priorities of Jeffords include freight and trade, rail, metro mobility, safety and security, and the environment, including greenhouse gas emissions.