Home | Short-Term Federal Funding Options Outside the Highway Trust Fund
Short-Term Federal Funding Options Outside the Highway Trust Fund
The past several decades have witnessed dramatic growth in freight demand, driven by economic expansion, global trade, and revolutionary changes in business logistics. Today, the nation is entering the early stages of a freight transportation capacity crisis. Federal funding options outside of the Highway Trust Fund are needed to ensure that our nation can stay competitive in the global economy.
The tonnage of freight moved in the United States is forecast to double between 2005 and 2035, from 16 billion tons to 31.4 billion tons. Trade with Canada is up. Oil imports and expanding trade with Mexico and Latin America have resulted in major increases in trade through Gulf Coast ports and across the U.S.–Mexico border. International container cargo coming primarily from Asia and Europe grew from 8 million units in 1980 to 40 million by 2000 and is expected to explode to 110 million by 2020. This is placing enormous pressure on West Coast and East Coast ports and the highway and rail distribution systems in between.
The nation benefits from trade, but the burden of meeting the demand is borne by the states and localities at gateways and on trade corridors. The nation also needs freight railroads to make the capacity improvements required so they can continue to carry their current market share of the increase in freight expected. AASHTO’s studies show that freight rail will be unable to do so without public funding in the range of $2.65 billion annually for the next 20 years.
The effects of growing demand and limited capacity are felt as congestion, upward pressure on freight transportation prices, and less reliable trip times as freight carriers struggle to meet delivery windows. Over time these costs add up to a higher cost of doing business, a higher cost of living for consumers, and a less productive and competitive economy.
Since 80 percent of freight in the United States is carried by truck, improving our highways should be the first priority. The states, the federal government and the private sector should collaborate to reaffirm the importance of investing in highway trucking capacity. States should be provided the authority and resources necessary to provide truck-only lanes or truck-only-toll lanes where demand warrants. States should create, and the federal government should support, multi-state/regional institutions to coordinate, manage, and guarantee the performance of economically important highway freight corridors which cross more than one state. Finally, the federal government should support efforts by states to focus highway programs on significant supply-chain bottlenecks at interchanges, gateways, intermodal connectors, and international borders.
Whether the problem is the need for better intermodal connections to ports, airports, or railroads, or the expansion of railroad capacity itself, the scale of investment needed is beyond that which can be met from the Highway Trust Fund. The United States needs to find ways to significantly increase freight-related investment using new sources of revenue.
Table 6. Federal Revenue Options Outside Highway Trust Fund
Stabilizing funding for Amtrak and capitalizing new intercity passenger rail corridor service will also require substantial revenues from outside the Highway Trust Fund. There are several options for generating revenues outside the Highway Trust Fund which have potential. (Table 6.)
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Investment Tax Credits. The Association of American Railroads is pushing for federal investment tax credits for rail improvements which improve capacity. A recent example is Senate Bill 3742, the “Freight Rail Infrastructure Capacity Expansion Act,” co-sponsored by Senators Trent Lott of Mississippi and Kent Conrad of North Dakota. It would provide incentives for investments in capacity enhancing freight rail infrastructure through both tax credits and tax deductions.
This program is designed to stimulate private capital investment by railroads as well as shippers, intermodal carriers, and other companies that make qualified expenditures for capacity expansion projects. AASHTO has indicated its support for this concept, providing that a satisfactory mechanism for determining public benefit can be mutually determined with the railroads. It is estimated that this measure could generate new, private investment capital of $6 billion over a five-year period, or the equivalent of $1.2 billion per year.
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Dedicating 5 Percent of Customs Fees for Port Access and Intermodal Freight Projects. Dedicating 5 percent of customs fees to port intermodal connections via rail and highways would bring in $1.8 billion per year. Customs revenues are derived from duties on imported goods passing through international gateways. The transportation of these goods imposes significant costs on ports, intermodal facilities, and the surrounding communities. Over the next 15 years the number of international containers expected to cross U.S. docks and border crossings is expected to grow from 40 million units to 110 million units. With growth rates like these, sharing only 5 percent of this rapidly growing resource should prove reasonable.
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Container Fees. Another idea is the imposition of a container fee of $30 on every 20-foot cargo container, which would be placed in a trust fund dedicated to freight-related improvements nationwide. If applied at all U.S. ports, it is estimated that this could generate in the range of $2 billion per year.
- Tax Credit Bonds. In 2005, Senators Talent, Wyden, Coleman, and Corzine introduced a “Build America Bonds” program which would have made $50 billion in tax credit bonds available through a transportation finance corporation. AASHTO had developed a similar concept. The U.S. Chamber, AGC, ARTBA, and the AFL-CIO Building Trades have all expressed interest in this concept. The tax credit bonds would be long-term debt issued by a federally-chartered, non-profit Transportation Finance Corporation (TFC). Instead of interest payments, investors would receive an annual tax credit which they could use to offset their federal tax liabilities. The proceeds from the $50 billion in bonds the TFC could be authorized by Congress to issue would go to fund projects including freight rail and intercity passenger rail improvements, highway corridors of national significance, freight bottleneck solutions such as the CREATE project in Chicago, and Transit New Starts. $8 billion to $10 billion annually could be made available through this six-year program. It could be used to jump-start many badly needed projects of national significance.
If all of the above options were enacted this could increase investment in freight-related projects by $5 billion to $10 billion annually from resources outside the Highway Trust Fund in the period from 2010 to 2015.
If the Tax Credit Bond program were authorized, at least half or $25 billion, could be used to fund projects including intercity passenger rail corridors, highway corridor improvements, and transit new starts.
Florida Turnpike employees such as Diane Decker collect the tolls that have been used to build two-thirds of all new lane-miles in the state, in the past 15 years.
