President’s proposed budget would boost transit; states not waiting on Washington

By Chrissy Mancini Nichols

Apr 16, 2013

This post first appeared at metroplanning.org

As political gridlock continues to slow the works in Washington, D.C., the outlook for sustainable transportation funding remains highly tenuous. Amid uncertainty in the Capitol, a dearth of public funding, and crumbling infrastructure, states have had to take transportation funding into their own hands.

In Washington

That’s not to say Washington isn’t trying. President Obama’s proposed fiscal year 2014 budget again includes significant multi-modal transportation investments. In total the proposal would fund the U.S. Dept. of Transportation at $77 billion – a 5.5 percent, or $4 billion, increase over 2012 levels. The proposal calls for:

•   $10.9 billion for the Federal Transit Administration, including a request for $8.6 billion to support formula grants for capital investments, equipment such as busses and rail cars,  maintenance and operations, and $2 billion in capital investment grants for new and expanded transit service;

•   $6.6 billion for passenger rail;

•   $10 billion to capitalize and create a National Infrastructure Bank;

•   The creation of the America Fast Forward bond program which would provide a 28 percent federal subsidy on the interest costs of state and local bonds for infrastructure.  The America Fast Forward program is modeled after the expired Build America Bonds which supported more than $181 billion in new infrastructure; and

•   Full funding for the current transportation law, MAP-21, for fiscal year 2014, with a 25 percent funding increase after it expires. (While MAP-21 funding was authorized when the law was enacted, Congress still must appropriate funding annually.)

The president again called for an additional $50 billion infusion of funds for transformative transportation investments in 2014. Of that, $9 billion would be dedicated to transit state of good repair (to provide efficient, reliable, and safe service,) new capital projects, and granted on a competitive basis through programs like the highly successful TIGER.

Unfortunately, the president’s proposal offers no sustainable funding solution. The proposed funding source would reallocate a portion of what would have been spent on military operations in Iraq and Afghanistan, which, according to President Obama, is “revenue-neutral” and therefore not a long-term fix. Congress is unlikely to accept war savings as a revenue source, so unless the administration proposes another funding mechanism, it’s up to Congressional leaders to agree on a way to deal with the bankrupt highway trust fund.

States taking the lead

So where does that leave state and local governments? With all this uncertainty at the federal level, states are crafting their own solutions to find the resources for needed transportation investments. In total, 19 states have approved or are considering legislation to increase transportation funding. Three have increased motor fuel taxes this year: In Wyoming, Republican Gov. Matt Mead signed a bill that will increase the state’s gasoline tax by 10 cents per gallon; Virginia Republican Gov. Bob McDonnell will raise $3.5 billion for infrastructure by raising the sales tax and creating a wholesale tax on motor fuel; Maryland Democratic Gov. Martin O’Malley signed a bill to increase the gas tax by as much as 20 cents per gallon when fully phased in. Importantly, the taxes in Virginia and Maryland, two transit-heavy states, are tied to the price of gas or inflation, a step toward revenue stability.

To stretch dollars even further, local leaders are also tapping innovative financing mechanisms. Denver renovated its Union Station by leveraging advantageous federal Transportation Infrastructure Finance and Innovation Act loans with tax increment financing and will build a new transit line through a public-private partnership, as did Vancouver, CA. San Francisco is constructing a new multi-modal transportation terminal in a vibrant new neighborhood with tax increment financing, special assessment funds, and development impact fees. In the Washington, D.C., region, businesses petitioned to raise a special assessment on their property taxes, which when combined with Dulles toll road revenues will fund a part of the Dulles Metrorail extension. Many cities are using variable-priced parking by time of day and day of week to generate additional revenue to invest in transit and pedestrian improvements and enhancements in metered areas.

Chicago is also seeking out more manageable financing solutions for transportation upkeep and expansion. The Chicago Infrastructure Trust is an opportunity to complement the city’s traditional capital plan by attracting private sector funds to build and maintain Chicago’s aging infrastructure. Further, if it is decided the lease of Midway Airport is sensible and provides value, funds could go toward infrastructure projects. There are also opportunities to explore using variable-priced parking to fund transit, bike and pedestrian improvements. The Metropolitan Planning Council is partnering with the Chicago Metropolitan Agency for Planning to study just that in the Wicker Park and Bucktown neighborhoods. While Chicago has used tax increment financing to support transit construction, it could consider a category of districts specially designed just for transit corridors—sound economics, as locations near transit investments command higher land prices, benefiting land owners and developers.

It’s admirable that states and metropolitan regions are evolving, due to the tenuous condition of national transportation funding, to adapt new techniques and tools to their specific needs. Continuing to explore new financing solutions, such as the infrastructure trust, value capture and variable-priced parking, will keep Chicago a national leader in infrastructure planning – and more importantly, ensure our transportation system continues to be a regional and national asset that serves residents and attracts businesses.