Paying For The Highways Of TomorrowWritten By: CHRISTIAN KLEIN
Article Date: 04-01-2005
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Infrastructure supporters are already looking several years down the road.
As I write this, Congress is still working to reauthorize the federal highway program. But while a replacement for TEA-21 may still be a work in progress, infrastructure supporters are already looking several years down the road and trying to figure out how to pay for the highway program of the future. Here's why: Under current law, federal highway and transit construction is funded by the Highway Trust Fund. The Trust Fund gets its revenues from highway user fees, of which the 18.4 cents per gallon gas tax is the most important.
At present, Trust Fund revenues are just over $34 billion per year. Revenues are expected to continue to increase in the coming years, but the increase will be slow and, when inflation is factored in, won't allow for much growth in real spending. In fact, the $283.9 billion, six-year highway program, endorsed by the Bush administration and GOP congressional leaders (which is based on an estimate of future Trust Fund revenues) would increase highway investment by only about 4 percent over current program levels when the numbers are adjusted for inflation.
As we've witnessed over the past several years, despite public support for the concept of a user fee funded system, few lawmakers on Capitol Hill are brave enough to stand up and openly advocate either a gas tax increase or an inflation adjustment to restore the gas tax's buying power.
So highway advocates are looking for other ideas to fund the highway program of tomorrow. All options are on the table. Some, including Rep. Mark Kennedy (R-MN), have proposed innovative toll schemes. Others are floating another idea that's gaining a lot of traction - bonding.
At a Capitol Hill press conference in mid-February, Sens. Jim Talent (R-MO), Ron Wyden (D-OR), and John Corzine (D-NJ) unveiled their bipartisan proposal to use tax exempt Build American Bonds to raise an additional $30 billion for highway and transit construction.
Under the plan, a new, federally chartered, non-profit corporation would be set up to issue $39 billion in bonds. Of the money raised by the bond sales, $30 billion would be used to fund transportation projects. The remaining $9 billion would be invested for the life of the bonds (30 years) and would generate sufficient returns to repay the full $39 billion.
Build America Bonds would be sold to both corporate and individual investors in different denominations. Instead of interest, bond holders would receive tax credits that could be applied against the holder's federal tax liability. Estimates are that the additional highway spending from Build America Bonds would help the economy add 1.5 million jobs and spur more than $285 billion in total economic activity.
So would Build American Bonds be a good addition to the current highway construction funding mechanisms? We think so and so do our construction industry allies. The Talent plan has been endorsed by a broad coalition of groups including the American Road & Transportation Builders Association, the Associated General Contractors, the National Stone, Sand & Gravel Association, the National Asphalt Pavement Association, and, of course, AED.
Build America Bonds are a good start, but given estimates that we should be spending 40 percent more as a nation on the transportation infrastructure just to maintain current safety and congestion conditions and twice as much if we want conditions to improve, they're only a start.
If the Interstate highway system of tomorrow is going to meet the needs of our increasingly mobile population and help our economy continue to grow, we'll need a lot more creative ideas like Sen. Talent's in the years ahead.
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