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Posts from the Infrastructure Category

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The State of American Infrastructure Spending in Four Charts

If you’ve checked the news on the subject of American transportation infrastructure lately, you’ve probably heard that the sky is falling. It’s true that Congress can’t get its act together and pass a decent transportation bill, but the amount of money that’s being spent isn’t the problem so much as the fact that we’re spending it on expanding highways instead of keeping the stuff we have in good shape.

A new report from the Congressional Budget Office adds some useful perspective on public infrastructure spending (federal, state, and local, including water infrastructure) since 1956 [PDF]. Here are four major takeaways.

Infrastructure Spending is Fairly Stable as a Share of GDP

Measured as a share of Gross Domestic Product, public infrastructure spending has been fairly stable throughout the last six decades at about 2.4 percent, reports the CBO. The most recent bump came in 2009 and 2010 because of the stimulus package, when it rose to 2.7 percent. It has declined somewhat since 2011.

Source: Congressional Budget Office

But Costs Have Climbed

Beginning in 2003, the cost of raw materials like concrete and asphalt increased more rapidly than the prices of other goods, the CBO reports. So if you factor in these specific costs, inflation-adjusted public infrastructure spending has declined about 9 percent since 2003 (the dark blue line).

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Is Raising the Gas Tax Really the Answer?

Cross-posted from the Frontier Group

In the 1920s, Great Britain debated the future of its Road Fund – a pot of money raised from vehicle excise taxes and devoted exclusively to road repair. Then-Chancellor of the Exchequer Winston Churchill opposed the fund, arguing that, if drivers paid taxes dedicated solely to roads, “It will be only a step from this for them to claim in a few years the moral ownership of the roads their contributions have created.”¹

Who pays and who "owns" the roads? Photo: Richard Masoner

Who pays and who “owns” the roads? Photo: Richard Masoner

Here in the United States, we have long been under the misimpression that the taxes paid by drivers – most notably the gas tax – cover the cost of building and keeping up our roads. And is there any doubt that those contributions have come with a claim of moral ownership? For decades, transportation policy has been shaped by the idea that drivers do their “fair share” to maintain the infrastructure they use, while other transportation users – those who ride transit, ride bicycles or walk – are little better than freeloaders.

If you’ve ever wondered why some people get enraged at the so-called “diversion” of small amounts of gas tax revenue to transit, or are apoplectic over the dedication of a small amount of roadway space to bike lanes, or perceive efforts to make communities more walkable as a “war on cars,” it all comes down to the deeply ingrained belief that roads have been built solely by and for the exclusive benefit of motorists.

A new report we at Frontier Group have co-authored with U.S. PIRG Education Fund, Who Pays for Roads?, explodes the “users pay” myth. Nearly half of the money now used to build, maintain and operate highways now comes from ordinary taxpayers – you and me – regardless of how much we drive.

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Study: Most Roads Don’t Pay for Themselves

Most American roads — even the most highly trafficked — are financial losers. That’s a major finding from a new study by the Center for American Progress [PDF].

Four out of 10 American highways don't generate enough revenue to pay for maintenance. Photo: Wikipedia

Four out of 10 American highways don’t generate enough revenue to pay for maintenance. Photo: Wikipedia

A financial analysis by the think tank found that about four out of 10 U.S. highways don’t carry enough traffic to generate sufficient revenue to pay for their maintenance — let alone construction.

CAP analyzed individual road segments from around the National Highway System. Using publicly available traffic data, researchers were able to estimate how much revenue each segment generated in terms of user fees paid by drivers, namely state and federal gas taxes. Those totals were then compared to average maintenance costs, assumed to be two resurfacings and one major reconstruction over the course of 30 years.

That just six in 10 highways passed such a low test should be a wake-up call, CAP authors say. For one, the cost analysis did not include initial construction costs or inflation. Including a modest annual 1 percent inflation adjustment on the cost of construction would have increased the share of roads that failed to cover costs by 9 percent.

CAP’s study only examined national highways, which host far more traffic than the average road. Roads on the National Highway System represent only about 5 percent of America’s total road network, but carry 55 percent of all vehicle traffic. Meaning the financial returns on local roads, which generate fewer trips and less fuel use than highways, are much worse.

The study should help dispel the false notion that roads pay for themselves, write authors Kevin Degood and Andrew Schwartz. It should also inspire us to rethink the way we disperse funding for roads versus transit, they say. (At the federal level, the split is about 80-20.) In most cases, the argument that roads are self-sustaining is a myth.

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You Can Help Make State DOTs Accountable for How They Spend

States have prioritized maintenance. Will new standards help? Image: Smart Growth America

States have failed to prioritize maintenance instead of expansion. Will new standards help? Image: Smart Growth America

Pressure is mounting on the president and Congress to keep roads and bridges from falling apart by increasing transportation funding. But a big part of the problem is states, which receive the lion’s share of federal transportation funds but opt to spend most on new roads, instead of maintaining existing infrastructure.

Between 2009 and 2011, states spent just 45 percent of their highway money maintaining the 900,000 miles of roads they control, according to Smart Growth America. Meanwhile, they poured 55 percent into road expansions. Some states spent more wisely and some spent more irresponsibly. The worst spent upward of 90 percent of their budgets on new construction during that time period.

And that’s always been their prerogative. Most of the tens of billions of dollars in federal funding that flows to states every year comes with few strings attached. The system is also opaque: Determining how states spend their money is extraordinarily difficult.

How can people demand better from their state DOT if they can’t tell what their DOT is doing? Advocates see greater transparency as an important tool for change, and they’re fighting to implement strong new federal standards to grade state DOTs on safety, maintenance, and other key indicators.

MAP-21, the transportation bill enacted in 2012, included provisions for U.S. DOT to hold states to a new set of performance standards. Now, two years after passage, policy makers at the agency are beginning to define those metrics. For the most part, the law doesn’t penalize failure to hit targets, but its reporting requirements could compel state DOTs to be publicly accountable for their decisions — provided they’re stringent enough.

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More Money Won’t Fix U.S. Infrastructure If We Don’t Change How It’s Spent

Milwaukee's Marquette Interchange, which cost $810 million to construct, sits practically empty during daylight hours.

Milwaukee’s Marquette Interchange is a beast that cost $810 million to build. If this is how state DOTs spend their money, existing infrastructure will continue to crumble. Photo: HNTB

“America’s infrastructure is slowly falling apart” went the headline of a recent Vice Magazine story that epitomizes a certain line of thinking about how to fix the nation’s “infrastructure crisis.” The post showed a series of structurally deficient bridges and traffic-clogged interchanges intended to jolt readers into thinking we need to spend more on infrastructure.

The idea that decrepit roads are caused by a lack of money is widespread. Vox‘s Matt Yglesias recently argued that the nation should borrow a bunch of money at low interest rates now and invest in an “infrastructure surge” that would help put idled construction workers back to work. Liberal crusader Bernie Sanders has introduced a bill in the Senate to spend $1 trillion on infrastructure over the next five years.

States have been shirking their maintenance responsibilities in favor of building expensive new projects. Image: Smart Growth America

States have been shirking their maintenance responsibilities in favor of building expensive new projects. Graphic: Smart Growth America

It’s true that a surge of investment could be very helpful in building modern, high-capacity transit systems in American cities, or in constructing high-speed rail links between major metros. It’s also true that the federal gas tax has been eroded by inflation for more than 20 years, so tens of billions of dollars in general fund revenue has been diverted to transportation spending since 2008.

But throwing more money at the problem overlooks the fatal flaw in American transportation infrastructure policy: The system is set up to funnel the vast majority of spending through state departments of transportation, and those agencies have an absolutely terrible track record when it comes to making smart long-term decisions. As long as state DOTs retain unfettered control of the money, potholed roads and decrepit bridges will remain the norm.

That’s because the sorry state of American transportation infrastructure is mainly the result of wasteful spending choices, not a lack of funding.

State DOTs’ lack of fiscal discipline is nothing short of criminal. The chart on the right, courtesy of Smart Growth America, shows how states divided spending between new construction and maintenance from 2004 to 2008. States used most of their money — 57 percent — on new construction (projects like that massive but oddly empty interchange in Milwaukee, above, don’t come cheap). Meanwhile, states used the 43 percent left over to maintain the remaining 98.7 percent of road infrastructure. This is a recipe for ruin.

If you think that states have felt chastised in the last few years, think again. Here’s a chart from the Minneapolis Star Tribune showing how Minnesota DOT divides its money between maintenance and new construction:

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The Indiana Toll Road and the Dark Side of Privately Financed Highways

This is the first post in a three-part series on the Indiana Toll Road and the use of private finance to build and maintain highways. Part two takes a closer look at how Australian firm Macquarie manages its infrastructure assets. Part three examines the incentives for consultants to exaggerate traffic projections, making terrible boondoggles look like financial winners.

Who owns the Indiana Toll Road? Well, as of the bankruptcy filing in September, Macquarie Atlas Roads Limited (MQA Australia), which is joined at the hip to Macquarie Atlas Roads International Limited (MQA Bermuda) on the Australian stock exchange, has a 25 percent stake. Macquarie’s investment bank arm brokers the various transactions related to ownership of the road, collecting fees on each one. Welcome to the world of privately financed infrastructure. Graphic: Macquarie prospectus

In September, the operator of the Indiana Toll Road filed for bankruptcy, eight years after inking a $3.8 billion, 75-year concession for the road with the administration of Governor Mitch Daniels.

The implications of the bankruptcy for the financial industry were large enough that ratings agency Standard & Poor’s stepped in immediately to calm nerves. In a press release, the company attempted to distinguish the Indiana venture from similar projects, known as public-private partnerships, or P3s: “We do not believe this bankruptcy will slow the growth of current-generation transportation P3 projects, which have different risk characteristics.”

But the similarities between the Indiana Toll Road and other P3s involving private finance can’t be ignored. And as we’ll see, even the differences aren’t all good news for the American public. Once hailed as the model for a new age of U.S. infrastructure, today the Indiana deal looks more like a canary in a coal mine.

At a time when government and Wall Street are raring to team up on privately financed infrastructure, a look at the Indiana Toll Road reveals several of the red flags to beware in all such deals: an opaque agreement based on proprietary information the public cannot access; a profit-making strategy by the private financier that relies on securitization and fees, divorced from the actual infrastructure product or service; and faulty assumptions underpinning the initial investment, which can incur huge public expense down the line. Though made in the name of innovation and efficiency, private finance deals are often more expensive than conventional bonding, threatening to suck money from taxpayers while propping up infrastructure projects that should never get built.

For the parties who put these deals together, however, the marriage of private finance and public roads is incredibly convenient. Investors are increasingly impatient with record-low returns on conventional bonds, and are turning to infrastructure as an asset class that promises stable, inflation-protected returns over the long run.

Meanwhile, governments are eager to fix decaying infrastructure — but without raising taxes or increasing their capacity to borrow. On the occasion of yet another meeting intended to drum up investor interest, Transportation Secretary Anthony Foxx recently wrote on the U.S. Department of Transportation’s blog: “With public investments in our nation’s important transportation assets steadily declining, we need to find better ways to partner with private investors to help rebuild America.”

Those investors are lining up to get in the infrastructure game. According to the Congressional Budget Office, about 40 percent of new urban highways in America were built using the private finance model between 1996 and 2006. Since 2008, that figure has jumped to almost 70 percent.

In an attempt to get even more deals done, the current federal transportation bill ramped up funding for the TIFIA program — which offers subsidized federal loans and other credit assistance, often to projects that also receive private backing — by a factor of eight.

Major private investors have stepped up their lobbying efforts to close more of these lucrative deals. Meridiam North America recently hired Ray LaHood, Foxx’s predecessor as Transportation Secretary, and Macquarie Group — which orchestrated the Indiana fiasco — hired away a White House deputy assistant to “continue strengthening our relationships with key elected officials… while also exploring new investment opportunities.”

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President Obama’s Hollow Push for Infrastructure Investment

With the Tappan Zee Bridge behind him, President Obama made his case for more infrastructure spending. Photo: ##https://twitter.com/TheObamaDiary/status/466676032834387969/photo/1##TheObamaDiary/Twitter##

With an old highway bridge and the cranes building its replacement behind him, President Obama made his case for more infrastructure spending. Photo: TheObamaDiary/Twitter

This afternoon, President Obama stood by New York’s Tappan Zee Bridge and made a speech pressing Congress to do something about infrastructure investment. It’s part of his Infrastructure Week push for Congress to pass a fully funded transportation reauthorization bill. Many other groups are spending this week sounding the same horn.

“If they don’t act by end of summer, federal funding for transportation projects will run out. The cupboard will be bare,” Obama said today. “Nearly 700,000 jobs will be at risk.”

“So far, at least, the Republicans who run this Congress seem to have a different priority,” he said. “Not only have they prevented, so far, efforts to make sure funding is still in place for what we’ve already got, but their proposal would actually cut job-creating grant programs that funded high-priority transportation projects in all 50 states — they’d cut ‘em by about 80 percent.”

Indeed, Obama has submitted a bill to Congress calling to increase federal transportation investment to $302 billion over the next four years. The problem is, his plan to pay for it — using what he calls “pro-growth” business tax reform and the repatriation of offshore profits — is falling on deaf ears in Congress. Advocates criticize the plan as a one-time gimmick, not a long-term funding source.

The most obvious and simple method of raising more revenue in the long run is to increase the gas tax, which hasn’t been raised since 1993 and has lost an estimated 37 percent of its purchasing power. Experts say an increase of 10 to 15 cents per gallon is needed to fill the gap in the nation’s transportation funding.

But the Obama administration has been adamant in its refusal to raise the gas tax. Though former Transportation Secretary Ray LaHood came out in favor of a 10 cent hike almost as soon as he left office, he toed the official line while at U.S. DOT, insisting that a hike was a non-starter. At a Commerce Committee hearing last week, LaHood’s successor, Anthony Foxx, disappointed senators by dodging a question about increasing the gas tax, saying only that he would “listen to Congress.”

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Stuck With No Bike Lane? Your Complaint to Congress Is Three Clicks Away

stuck margins

Instead of just shaking your fist, let BAF bring your demand for better bike infrastructure to Congress.

A few months ago, we told you that Building America’s Future had released an app called, “I’m Stuck!” It allowed you to send a quick email to your Congressional representatives, telling them that you were stuck in traffic, or on an overcrowded bus or a delayed train, and you wanted Congress to approve more funding to upgrade infrastructure. At the time, we noted that there was no bike/ped component to the app, but BAF has changed that — halfway, at least.

Among the new features of their app redesign, BAF has added a way to tell Congress you need better bicycle infrastructure. Here’s their sample message you can send with a few simple clicks (or taps) to your reps:

I’m stuck on my bike without a safe route to travel. Bicyclists like me need safe routes, such as dedicated bike lanes — and we need your help. Please include funding for additional bicycle infrastructure in any new transportation and infrastructure investments.

It’s important. It’s your decision. It’s past time.

If it were up to me, the message would add that by riding a bike, the person sending the message is doing a big favor to everyone else using the transportation system — or breathing the air, for that matter. And it would include an option for pedestrians.

According to BAF, the app has been downloaded 11,000 times and 3,500 messages have been sent to Congress. The old version didn’t let them track how many were complaining about sitting in traffic versus how many were complaining about inferior transit. And as we mentioned last time, you’ll have to customize your message if you want to make sure Congress knows that you’re not asking for more car lanes but rather a transit line that would get you off the road altogether.

And remember, distracted driving rules apply. Even if you’re on a bike, please pull over before sending this message!

You can download the app here.

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Senators Warner and Blunt Take Another Stab at an Infrastructure Bank

You’d be forgiven for being cynical about big plans in Washington to create an infrastructure bank.

Sen. Mark Warner is behind a new attempt to create an infrastructure bank. Photo: ##http://www.dailykos.com/story/2013/02/18/1187984/-VA-Sen-Mark-Wanrer-D-Elizabeth-Warren-D-MA-Push-For-Action-On-Consumer-Credit-Reporting##DailyKos##

Sen. Mark Warner is behind a new attempt to create an infrastructure bank. Photo: DailyKos

President Obama has been talking about it for years. Every so often he comes out with a new big “push” for infrastructure investment, and it includes a bank of some kind. Multiple Senate bills have proposed an infrastructure bank or fund, sometimes housed under U.S. DOT and sometimes independent, sometimes with grant-making authority and sometimes without. Republican opposition has strangled all of them.

Virginia Democrat Mark Warner and Missouri Republican Roy Blunt introduced a new bill in the Senate last week, and the one really new thing about it — the thing that might give it legs — is the fact that Blunt is on board, along with four other Republicans. The only Republican to previously get behind an I-bank effort, Kay Bailey Hutchison, is no longer in the Senate.

The BRIDGE Act’s sponsor list so far is evenly split between Rs and Ds. In addition to Blunt and Warner, the bill has been co-sponsored by Sens. Lindsey Graham (R-S.C.), Kirsten Gillibrand (D-N.Y.), Dean Heller (R-Nev.), Chris Coons (D-Del.), Amy Klobuchar (D-Minn.), Roger Wicker (R-Miss.), Claire McCaskill (D-Mo.), and Mark Kirk (R-Ill.).

The idea is to use federal loans and loan guarantees to incentivize private investment in infrastructure.

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Wisconsin’s Misplaced Priorities on Display as Green Bay Bridge Sags

The Leo Fringo Memorial Bridge in Green Bay, Wisconsin is sagging 22 inches. Image: USA Today

In yet another reminder of what happens when states ignore their existing infrastructure while plotting massive road expansions, a section of heavily traveled bridge in Green Bay Wisconsin is “sagging” nearly two feet. Authorities have closed the bridge, which carries about 40,000 vehicles a day, after frantic calls from drivers.

USA Today carried this transcript from 9-1-1 calls reporting the problem early Wednesday:

Truck driver: I hope it’s not an emergency. I didn’t know who else to call. … It looks like there’s a part (of the I-43 bridge) that’s sagging.
Dispatcher: A part that’s sagging?
Truck driver: Yes, usually, I mean a bridge goes like it’s a hump. … There’s a section of the bridge that’s actually a dip.

Under Governor Scott Walker, Wisconsin has been on a highway-building binge. Some $6 billion in projects are planned, including the $1.7 billion Zoo Interchange outside Milwaukee. But in the race to expand, other transportation priorities have suffered, including transit and the maintenance of existing roads. All the while, Walker has resisted seeking new revenues through gas taxes or tolls to shore up the state’s transportation coffers.

Thankfully no one was injured in Green Bay. But perhaps it’s time Wisconsin rethought its grandiose plans for a double-decker highway in Milwaukee for less splashy alternatives, like making sure the state’s bridges are sound.