Transportation Infrastructure: Predictions for 2020
A shift in public opinion toward funding will result in transportation gains in the new decade
By Manuel H. Lazerov
At roughly the same moment that the public impeachment hearings were initiated, former Vice President Joe Biden suggested an infrastructure plan along the same lines that the Democrats and the administration agreed upon earlier, but have not moved forward to implement. Mr. Biden, however, focused upon one infrastructure sector: transportation. That makes a great deal of sense on so many levels, because much of our transportation infrastructure needs to be coordinated nationally.
Some historical perspective is helpful in predicting the future. We should begin with the Federal Aid Highway Act of 1956, which was initially funded by a $25 billion authorization for building 41,000 miles of roads over a 25-year period. The money was to be handled by a Highway Trust Fund which paid for 90 percent of highway construction costs, with the remaining 10 percent to be paid for by the states. Funds were to be generated via new taxes on fuel automobiles, trucks, and tires, but the federal portion of costs has come from taxes on gasoline and diesel fuel.
The limited access toll highways that had been built prior to the Act were incorporated into the Interstate system. Those included Ohio, New Jersey, Pennsylvania, Indiana, Illinois, Kansas, Oklahoma, Massachusetts, New Hampshire, Virginia, West Virginia, and Maine where tolls continue to be collected. The money is used for highway maintenance, improvements, and in several instances, tolls collected are passed along to the states’ general fund, which was never the original intent.
The costs for new and upgraded road transportation infrastructure as estimated by the ASCE in its 2017 Report Card is $836 billion. This consists of $420 billion for repairing existing highways, $123 billion for bridge repairs, $167 billion for system expansion, and $126 billion for system enhancement and environmental projects associated with road construction.
The impact of greater fuel efficiency has reduced money which would normally flow into the Fund to meet increased costs. Today, cars use 40 percent less fuel than they did in 1993. Congress been adamant about not increasing gasoline and diesel taxes since 1993 or to raise money to offset inflationary costs, while the introduction of ethanol contributes nothing to the Fund, whatsoever.
The political parties are in disagreement over how to fund future needs, while anticipated federal funding to state and local government, in general, will decline over the long term, as the interest carried on the nation’s increased debt crowds out expenditures on all government programs.
If one asks most people on the street, they’d say that the federal government should foot the entire cost of infrastructure upgrades and maintenance, without any increase in taxes or the deficit, and with no involvement from the private sector, whatsoever. It’s almost suggesting that Jack deliver the magic beans without the troubles that came with it.
Congress can barely sustain its existing mandates, let alone pile on new ones. In addition, members of Congress run with greater frequency than state and local officials, and want to be viewed as fiscally responsible.
So, here’s where we are. Many governments, at all levels, appear to be financially stretched. It’s a problem to convince taxpayers of the benefits of investing in our infrastructure. At the local level, everyone seems to be waiting for the feds to ride to the rescue, and alternatively, unwilling to undertake anything without it.
The restoration of confidence in our public officials is essential to break the existing gridlock, including the concern that public officials will make decisions that will leave the community saddled with the burden of failed public-private partnerships. And yet, there is resentment that our infrastructure is falling apart, while public resistance to realistic user rates is widespread.
For projects without obvious economic sustainability, government will eventually underwrite prospective losses, implicitly or explicitly, or certain projects will never get built. On economically feasible projects, public officials will increasingly offload as much risk as they possibly can through well-crafted agreements with the private sector.
For projects without obvious economic sustainability, government will eventually underwrite prospective losses, implicitly or explicitly, or certain projects will never get built. On economically feasible projects, public officials will increasingly offload as much risk as they possibly can through well-crafted agreements with the private sector.
The 2020 election will likely to be an inflection point in changing public opinion and attitudes. One can sense that the public is exhausted from the political gridlock that now exists, and will embrace the reality of what needs to be done to upgrade our transportation infrastructure.
Manuel H. Lazerov is President of Infrastructure Financial, Inc. He may be reached at www.infrastructurefinancial.org or (410) 531-3500.
