What Cities Can Unpack from the House Infrastructure Proposal

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Since the president released his infrastructure proposal this spring, city leaders across America have called on Congress to follow up with a proposal of their own. On July 23, Representative Bill Shuster (R-Pa.), Chairman of the House Committee on Transportation and Infrastructure, released a discussion bill on a transportation and water resources infrastructure investment package.

While even the chairman, who is retiring, has said the bill is unlikely to gain traction before the midterm elections, putting pen to paper on a proposal for his colleagues to react to is a major step.

Now, city leaders will also have the opportunity to respond to the discussion draft and — to make their thoughts and needs known to Congress. Here are some of our key insights as to where the chairman’s infrastructure proposal is leaning, and how that may impact cities:

1. Fix Broken Federal Funding to Match Mounting Needs

Transportation

As you may know, America’s transportation piggy bank (a.k.a. the Highway Trust Fund) has been falling short of meeting the nation’s road, bridge and transit needs for some time. This is because the gas tax pennies we pay when we fill up our cars isn’t quite filling up the Highway Trust Fund like it used to do. Our cars are now either more fuel efficient or electric and not using gas. On top of that, the gas tax stays at a fixed 18.4 cent rate per gallon.

While the price to fix a road has gone up, we’re still only collecting the amount we needed back in 1993. To make sure Congress doesn’t do less than it has committed to, the past decade or so has seen the use of general transfers and budgeting gimmicks to keep up payments to cities and states who are doing the work. All in all, the Highway Trust Fund is falling short and the system isn’t working, so the question remains: How do we fix it?

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The Shuster proposal starts with brainpower — a commission of smart people nominated by Congress to come up with one or more recommendations to achieve long-term solvency, but with one major stipulation — it cannot recommend a gas tax. It also requires that their recommendation be expedited into a bill for consideration by Congress. This ensures that it does not become just another report. At the minimum, Congress must consider it with a vote. Given how many commission reports are just gathering dust, this makes sense.

The proposal also recommends taking a big next step by establishing a national pilot of volunteers who will test out a potential solution — a pay-per-mile fee. Instead of paying when you fill up your tank, the miles you drive would be calculated and you would pay for what you “use.”

In prior transportation bills, Congress has funded smaller state-only pilots for vehicle-miles-travelled (VMT) fees, but this would be the first large scale proof point to show if it works. Volunteers to participate could be owners of both passenger vehicles and commercial motor vehicles, or even the owner of a fleet of commercial of motor vehicles, which would be a way to increase opt-in by commercial users.

From the city perspective, VMT has been discussed extensively and because it is technology-driven, if it integrates well, it could complement our smart cities. Given that commute time is a major factor for city dwellers, the VMT model may make city living a more cost-effective choice. However, the details of how the VMT would be implemented needs to be carefully balanced to ensure that equity, transparency and externalities are all considered. If miles, rather than gallons, are the backbone of a new system, cities will need to consider how this will impact their own local transportation networks.

Finally, the Shuster proposal does what some in Congress have said is the answer all along — it ramps up the gas taxes over three years. This will fix the shortfall so that level funding goes out the door in the near future. However, in order to convince his colleagues and the public of taking this unpopular approach, Shuster does this ramp up in exchange for taking the plunge and removing the gas tax entirely by 2028, which is when the new recommended sources from the commission would likely take effect.

Water

The U.S. faces substantial water needs in communities across the country. Water revenue funding must be right-sized to our needs. Old water pipes and plants and complex EPA requirements are troubling and looming investments for cities large and small. Perhaps to start moving towards a more right-sized fund, the Shuster proposal calls for reauthorizing and increasing the authorization level for the Clean Water State Revolving Fund, a move cities would strongly support.

2. Pushing the Private Sector to Participate

The private sector has traditionally invested heavily in U.S. infrastructure by purchasing low risk, tax exempt municipal bonds. Cities and states then use this market to make infrastructure improvements and pay them back over time. As the federal government has fallen short on revenue, they are also looking to find ways to increase private sector federal investment in infrastructure in new ways.

A concept called “asset recycling” is proposed in Shuster’s bill, as well the President’s infrastructure proposal, to incentivize cities and states to lease one infrastructure asset to private investors so they can pay for another. For example, a city owns an airport, which they lease to an investor; the federal government pays an incentive payment to the city for participating which the city combines with their lease proceeds to invest in another asset that is harder to lease, such as transit.

The challenge with asset recycling is that it incentivizes cities to contract their infrastructure out to the private sector in deals that they would not normally make. On the other hand, with so many infrastructure needs, setting aside limited federal funding to incentivize the private sector is at best, a low priority, and at worst, a give-away.

The federal government has seen tremendous success with backing large scale transportation investments at low rates using its TIFIA program with U.S. Department of Transportation. Recently, Congress moved to create a similar water-based program, called Water Infrastructure Finance and Innovation Act (WIFIA) with the U.S. Environmental Protection Authority. Now, Shuster is suggesting that a similar WIFIA program is needed for the U.S. Army Corps of Engineers.

Given the success of these programs, cities could stand to benefit from another loan program like this. Unfortunately in the past, cities have struggled to finance smaller projects. WIFIA is not an equal opportunity program, meaning its size should be reflective of the number of potential projects that could use and benefit from it.

Another piece of the proposal would allow for traditional federal water state revolving loan funds (SRF) to be leveraged with WIFIA funds. This is a loan leveraged for a loan; perhaps most similar to a second mortgage on a home. They propose that state finance authorities, who administer the state revolving funds, can leverage the State Revolving Loan Funds toward a WIFIA loan, and provide incentives to do so, such as no WIFIA application fee. It is interesting that Indiana’s state finance authority is in the process of securing a WIFIA loan to combine leverage with their SRF today; so while this is a potentially useful tool, it is seen by many as an existing authority.

3. Everyone Who Uses, Pays

When we think about paying for infrastructure, we often think about our portion — a water bill, an electric bill, a phone bill and maybe a gas tax. What these all have in common is that they are user fees built upon the general principle that you pay for what you use. In the transportation world, the rise of multimodal transportation continues, and with their rise comes a question of how to split the bill more fairly.

The Shuster proposal specifically calls out transit, buses, electric vehicles and bicycles, suggesting ways that they too may be able to chip into the transportation funding options. Shuster proposes removing the rate reduction for transit buses’ fuel, for charging electric vehicles battery feed and adding bicycle tire taxes. Today, each of these transportation participants are allowed exceptions from paying equally to cars, but we should also acknowledge the reasons they’re reduced — to encourage group rides which decreases congestion for other drivers, to reduce gas use which increases pollution, and to allow citizens a perk for exercising while decreasing congestion and pollution.

While it’s a nice talking point to say “everyone should pay equally,” perhaps equally must be seen holistically, because all modes and uses are not creating equal externalities. Changing these could create a disincentive toward multimodal users, and given that each person spends 42 hours wasted in traffic, cities should be inclined to consider how changing these policy levers will change outcomes.

Cities’ Message to Congress

Cities have one message for Congress: Rebuild With Us. Cities are trying to get infrastructure projects done, but we need our federal partner to keep up. Proposals like Chairman Shuster’s can help us move forward, but Congress must work together in a bipartisan manner to get a final bill passed.

As cities, we need to share our priorities, what works and what doesn’t. We encourage you to share your thoughts with your Senators and your hometown Representative. The good news is that they are headed home soon for August recess (if they’re not home already) and you can ask them in person where they stand on infrastructure. Call their office and see if they’re going to be at an event near you or just set up a time to sit down with them.

Cities believe that infrastructure should be at the top of Congress’ to-do list, and while appropriations have been helpful, we have a big problem on our hands at home with all of our infrastructure needs. Congress can start by fixing the Highway Trust Fund; ask your Representative – will you support a fix?

To view the Chairman’s Vision Statement, click here. To view the Section by Section summary, click here. To view the bill text in its entirety, click here.

brittney2_ready.jpgAbout the Author: Brittney Kohler is the program director for transportation and infrastructure at the National League of Cities.