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Infrastructure Funding Dilemma: Will the FAST Act Ever Get Out of First Gear?

Another ambitious program for fixing and expanding the nation's transportation infrastructure. With no clear way how to pay for it. Déjà vu strikes again.

For all the bloodletting that characterizes national politics today, there's a consensus among both parties over the need for big, expensive improvements in infrastructure. President Trump made it a campaign theme. And one of President Obama's final acts was to sign into law the Fixing America's Surface Transportation (FAST) Act, which authorizes $305bn for a multitude of projects between fiscal years 2016 and 2020. They encompass highways, rail, motor vehicle safety, public transportation, hazardous materials, new technology and accompanying reports.

The FAST Act was intended to nudge local governments into moving forward with critical transportation projects “with the confidence that they will have a federal partner over the long term,” according to the Federal Highway Administration. In fact, the money figure designated by the FAST Act is nowhere near sufficient to address the crumbling infrastructure, even from the federal side. Where the rest of the funds will come from continues to be a source of debate, with no clear answer in sight.

The government has fully acknowledged the shortfall. Anthony Foxx, Obama’s outgoing Secretary of Transportation, announced $759m in federal grants for 18 infrastructure projects across the country, under a program with the cumbersome title of Fostering Advancements in Shipping and Transportation for the Long-Term Achievement of National Efficiencies, or FASTLANE. That initial amount is to be supplemented by $3.6bn from private sources — again, unspecified as to where it will come from.

With a new administration, we press the reset button on U.S. transportation policy. Whether the Trump Administration sticks with the projects selected by its predecessor, or wipes the slate clean and begins again, remains to be seen.

The Eno Center for Transportation has waded into the mess with its own set of recommendations for improving the FASTLANE program. It takes for granted the need for a federal freight program, noting that “the overwhelming consensus is that the movement of freight is of inherent federal interest.” But the center’s report, titled “Life in the FASTLANE: Recommendations for Improving Federal Freight Grants,” finds plenty of room for improvement. Its main points:

--Congress needs to boost the funding available for FASTLANE grants, or a similar discretionary freight program, to at least $2bn annually.

--Congress should revise eligibility standards to cover all freight projects, including public and private railways, ports, waterways, highways, and intermodal connectors.

--Congress should restrict eligibility of the FASTLANE grants to freight projects alone.

--The U.S. Department of Transportation (DOT) needs to exercise greater transparency, explicitly describe its evaluation process, assign weights to set criteria, and publish the final results.

--DOT should emphasize the use of non-federal funds, both public and private, by adjusting the criteria for approval so that projects relying on fewer federal dollars are awarded a higher score.

--DOT should be “transparent and explicit” as to how it awards projects, with an eye toward achieving geographic diversity. And it should keep the equity aspect of the selection process “to a minimum.”

Paul Lewis, vice president of policy and finance with the Eno Center, said lawmakers need to build on the FASTLANE program, which runs for just four years. As for the additional money, the center believes Congress should dip into the general fund for at least part of it, then develop some form of freight-funding fee to cover the remainder over the long run.

Under the FAST Act, federal participation in new transportation projects remains high, at least in theory. The law caps FASTLANE’s share of project costs at 60 percent, although additional federal sources could boost that to as high as 80 percent (assuming, of course, that the money can be found).

The report notes that the initial round of FASTLANE grants was “vastly oversubscribed,” totaling more than $9.8bn. Hence the need for at least $2bn a year in grants. According to Eno, “if a federal grant program is truly going to have real impact on a national scope, there needs to be more funding available than what the FAST Act provides.”

Eno is silent on how a new “cost of freight shipment fee” would be administered, but that’s the crux of the problem. The last decade has seen a series of proposals for restoring infrastructure, some with stopgap funding schemes, but all have hung up on this essential question. The obvious move would be to raise the federal highway fuel tax, which has stood at 18.4 cents per gallon since 1993 and is not indexed to inflation.

”We’re still in uncharted waters as far as what the eventual proposal from the administration is going to look like in terms of private equity and tax dollars,” Eno senior fellow Jeff Davis said in a recent informational webinar presented by the center. “We’re also waiting to see [the level of] funding caps.” Both questions won’t be answered until the new Administration’s budget gels, a process that could take months.

Sentiment in Congress continues to skew heavily against any tax increase at all, so lawmakers might have to find another means of generating sufficient funds for the federal government’s share of infrastructure development. In the meantime, we’ll be left with yet another well-intentioned program that lacks the checkbook to make it work.

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