12 September 2013 MAP-21 and the Future of Federal Transportation Funding Joung H. Lee, Associate Director for Finance and Business Development

12 September 2013MAP-21 and the Future of Federal Transportation FundingJoung H. Lee, Associate Director for Finance and Business Developmentand Deputy Director, AASHTO Center for Excellence in Project Finance

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MAP-21 and the Future of Federal Transportation Funding

Joung H. LeeAssociate Director for Finance and Business Development

American Association of State Highway and Transportation Officials

Deputy DirectorAASHTO Center for Excellence in Project Finance

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CONSTITUTIONAL DUTY TOPROVIDE FOR TRANSPORTATION

“To establish Post offices and post Roads”Article I, Section 8, U.S. Constitution

Source: National Archives and Records Administration

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4Sources: Congressional Budget Office, Office of Management and Budget

GRADUAL DECLINE IN NATIONAL TRANSPORTATION INVESTMENT

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Federal Transportation Spending as a Percentage of GDPHighway Transit Airports

Source: American Society of Civil Engineers

CONTINUED DETERIORATION OF INFRASTRUCTURE CONDITIONS

Source: American Society of Civil Engineers

INCREASED INDIRECT COSTS TO THE TRAVELING PUBLIC

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7Source: World Economic Forum, The Global Competitiveness Report

US IS FALLING FURTHER BEHIND ON THE QUALITY OF INFRASTRUCTURE COMPARED TO PEER NATIONS

2008-2009 2012-2013

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MAP-21 IS A SIX-YEAR POLICY BILL WITH ONLY TWO YEARS OF FUNDING

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MAP-21 CONTINUES TO RELY ON HIGHWAY TRUST FUND—THE BACKBONE OF FEDERAL FUNDING

Source: Gary McCoy, CagleCartoons.com

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MOTOR FUEL TAXES COMPRISE 91% OF HTF REVENUES BUT FACE AN UNCERTAIN LONG-TERM FUTURE

Source: Federal Highway Administration, Highway Statistics, 2011

66.3%

24.8%

6.5%

1.2% 1.0%

0.1% Highway Trust Fund Receipts

Gasoline Fuel Tax

Diesel and Special FuelsFuel TaxTruck/Bus/Trailer Tax

Tire Tax

Heavy Vehicle Use Tax

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HIGHWAY TRUST FUND HEADWINDS:#1. AMERICANS AREN’T DRIVING AS MUCH

Source: Federal Highway Administration

2,800

2,850

2,900

2,950

3,000

3,050

Billi

ons o

f Mile

s

Vehicle Miles Traveled - June 2003 to June 2013(Moving 12 Month Total)

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0

10

20

30

40

50

60

70

80

90

100

Historical CPI-U Estimated CPI-U Based on 18-year Average from 1993-2011

PURCHASING POWER LOSS OF GAS TAX DUE TO INFLATIONPURCHASING POWER LOSS OF GAS TAX DUE TO INFLATIONPURCHASING POWER LOSS OF GAS TAX DUE TO INFLATION

52% Purchasing Power Loss by 2023

PURCHASING POWER LOSS OF GAS TAX DUE TO INFLATION

37% Purchasing Power Loss by 2012

HIGHWAY TRUST FUND HEADWINDS:#2. GAS TAX HAS LOST ITS PURCHASING POWER

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13Source: Congressional Budget Office

$57B drop

HIGHWAY TRUST FUND HEADWINDS:#3. IMPACT OF ALTERNATIVE FUEL VEHICLES

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• 15 September 2008: $8.017 billion General Fund transfer to HTF

• 7 August 2009: $7 billion General Fund transfer to HTF• 18 March 2010: $19.5 billion General Fund transfer to the

Highway Trust Fund• 6 July 2012: $2.4 billion Leaking Underground Storage Tank

Trust Fund transfer to HTF• FY 2013: $6.2 billion General Fund transfer to HTF• FY 2014: $12.6 billion General Fund transfer to HTF

(scheduled)• Total General Fund transfers to Highway Trust Fund:

$53.3 billion between 2008 and 2014

CASH TRANSFERS FROM GENERAL FUND HAVE AVOIDED HIGHWAY TRUST FUND “FISCAL CLIFF”

BUT HTF OUTLAYS ARE ESTIMATED TO OUTPACE RECEIPTS BY $15 BILLION OR MORE PER YEAR

30

35

40

45

50

55

60

65

70

75

80

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Dolla

rs in

Bill

ions

Highway Trust Fund Receipts and Outlays DiscrepancyReceipts Outlays

Excludes $8.017 billion transfer from General Fund to Highway Account of HTF in September 2008; $7 billion transfer from General Fund to Highway Account of HTF in August 2009; $19.5 billion transfer from General Fund to Highway and Mass Transit Accounts of HTF in March 2010; $2.4 billion transfer from Leaking Underground Storage Tank Trust Fund to HTF in July 2012; $6.2 billion transfer from General Fund to Highway Account of HTF in FY 2013; $10.4 billion transfer from General Fund to Highway Account of HTF in FY 2014; $2.2 billion transfer from General Fund to Mass Transit Account of HTF in FY 2014.

$1.3 $1.3 $1.3 $1.2 $1.2 $1.3$0.0

$1.3 $1.3 $1.4 $1.4 $1.4 $1.4 $1.5 $1.5

$40.7 $41.2 $40.8$38.9 $39.4 $40.0

$0.2

$31.4$32.4

$33.4$34.3 $35.0 $35.7 $36.2 $36.6

$9.4

$11.9 $11.3 $11.6 $11.7 $11.8

$3.7

$7.7 $7.8 $8.0 $8.1 $8.1 $8.2 $8.3 $8.4

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(Yea

r of E

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)

Highway Safety Federal-aid Highway Transit

Estimated Federal Highway and Transit Obligations from Highway Trust FundIF NO NEW REVENUES ARE FOUND, FEDERAL HIGHWAY OBLIGATIONS WILL FALL BY ALMOST 100% IN FY 2015

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IN FY 2015, VIRTUALLY ALL HTF RECEIPTS WILL BE USED TO PAY FOR PRIOR-YEAR COMMITMENTS

STATE-BY-STATE IMPACT WOULD BE DEVASTATING

State FY 2014 Estimated Apportionments*

FY 2015 Estimated Apportionments Based Program

Reduction by 99.5%

State FY 2014 Estimated Apportionments*

FY 2015 Estimated Apportionments Based Program

Reduction by 99.5%Alabama $739,377,548 $3,696,888 Montana $399,854,985 $1,999,275Alaska $488,657,038 $2,443,285 Nebraska $281,687,138 $1,408,436Arizona $713,043,171 $3,565,216 Nevada $353,877,660 $1,769,388

Arkansas $504,569,278 $2,522,846 New Hampshire $161,019,216 $805,096California $3,576,886,247 $17,884,431 New Jersey $973,045,591 $4,865,228Colorado $521,127,428 $2,605,637 New Mexico $357,883,246 $1,789,416

Connecticut $489,480,629 $2,447,403 New York $1,635,828,880 $8,179,144Delaware $164,854,236 $824,271 North Carolina $1,014,526,299 $5,072,631

Dist. Of Col. $155,498,965 $777,495 North Dakota $241,949,914 $1,209,750Florida $1,846,456,138 $9,232,281 Ohio $1,306,308,688 $6,531,543Georgia $1,258,346,951 $6,291,735 Oklahoma $618,075,107 $3,090,376Hawaii $164,830,236 $824,151 Oregon $487,110,616 $2,435,553Idaho $278,743,444 $1,393,717 Pennsylvania $1,598,989,212 $7,994,946Illinois $1,385,563,679 $6,927,818 Rhode Island $213,132,752 $1,065,664Indiana $928,604,225 $4,643,021 South Carolina $611,847,012 $3,059,235

Iowa $468,941,803 $2,344,709 South Dakota $274,835,348 $1,374,177Kansas $368,281,197 $1,841,406 Tennessee $823,529,537 $4,117,648

Kentucky $647,523,113 $3,237,616 Texas $3,075,425,063 $15,377,125Louisiana $683,994,609 $3,419,973 Utah $313,975,586 $1,569,878

Maine $179,896,577 $899,483 Vermont $197,790,025 $988,950Maryland $584,011,433 $2,920,057 Virginia $991,722,683 $4,958,613

Massachusetts $591,887,074 $2,959,435 Washington $660,662,044 $3,303,310Michigan $1,026,080,875 $5,130,404 West Virginia $425,895,633 $2,129,478

Minnesota $635,487,719 $3,177,439 Wisconsin $733,282,767 $3,666,414Mississippi $471,339,174 $2,356,696 Wyoming $249,664,972 $1,248,325

Missouri $922,597,239 $4,612,986 TOTAL $37,798,000,000 $188,990,000

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SO WHAT CAN BE DONE?

THERE IS CURRENTLY NO SHORTAGE OFTECHNICALLY FEASIBLE REVENUE OPTIONS

Illustrative Revenues Avg Revenues Total Revenues

Rate 2014 2015-2020 2015-2020Container Tax $1 per TEU= 421$ $15.00 6,317$ 6,893$ 41,361$ Customs Revenues (Partial Dedication) 1% of Receipts = 357$ 1.0% 357$ 408$ 2,451$ Drivers License Surcharge (Annual) $1.00 Surcharge = 222$ $5.00 1,109$ 1,154$ 6,926$ Excise Tax on Diesel (Increase) 1¢/gal = 399$ 15.0¢ 5,983$ 6,480$ 38,877$ Excise Tax on Diesel (Indexing) n/a 440$ 1,031$ 6,183$ Excise Tax on Gas (Increase) 1¢/gal = 1,282$ 10.0¢ 12,823$ 13,367$ 80,202$ Excise Tax on Gas (Indexing) n/a 1,046$ 2,384$ 14,303$ Freight Bill - All Modes 1% of Sales = 8,318$ 1.0% 8,318$ 9,236$ 55,415$ Freight Bill - Truck Only 1% of Sales = 7,221$ 1.0% 7,221$ 8,018$ 48,110$ Freight Charge - All Modes (Ton) 1¢/ton = 180$ 25.0¢ 4,492$ 4,988$ 29,929$ Freight Charge - All Modes (Ton-Mile) 1¢/ton-mile = 47,530$ 0.5¢ 23,765$ 26,389$ 158,334$ Freight Charge - Truck Only (Ton) 1¢/ton = 124$ 25.0¢ 3,098$ 3,440$ 20,641$ Freight Charge - Truck Only (Ton-Mile) 1¢/ton-mile = 13,911$ 0.5¢ 6,956$ 7,724$ 46,342$ Harbor Maintenance Tax (Increase) 0.1% Tax = 1,331$ 0.5% 6,657$ 7,264$ 43,584$ Heavy Vehicle Use Tax (Increase) 100% Increase = 852$ 15.0% 128$ 163$ 977$ Imported Oil Tax $1.00/Bbls = 3,528$ $1.00 3,528$ 3,528$ 21,171$ Income Tax - Business (Partial Dedication) 0.1% of current taxes = 440$ 1.0% 4,396$ 4,847$ 29,082$ Income Tax - Personal (Partial Dedication) 0.1% of current taxes = 1,508$ 1.0% 15,084$ 18,393$ 110,356$ Registration Fee on Light Duty Vehicles (Annual) $1.00 Fee = 259$ $10.00 2,594$ 2,731$ 16,387$ Registration Fee on Trucks (Annual) $1.00 Fee = 9$ $15.00 131$ 133$ 797$ Sales Tax on Auto-related Parts and Services 1.0% of Sales = 2,567$ 1.0% 2,567$ 2,883$ 17,299$ Sales Tax on Fuel - Diesel 1.0% of Sales = 1,253$ 11.0% 13,782$ 15,839$ 95,033$ Sales Tax on Fuel - Gas 1.0% of Sales = 3,711$ 8.0% 29,686$ 31,126$ 186,753$ Sales Tax on New and Used Light Duty Vehicles 1.0% of Sales = 2,619$ 1.0% 2,619$ 2,619$ 15,715$ Sales Tax on New Light Duty Vehicles 1.0% of Sales = 1,625$ 1.0% 1,625$ 1,625$ 9,752$ Sales Tax on Trucks and Trailers (Increase) 1% of Sales = 268$ 5.0% 1,340$ 1,677$ 10,062$ Tire Tax on Light Duty Vehicles $1.00 Fee = 195$ $3.00 584$ 615$ 3,687$ Tire Tax on Trucks (Increase) 100% Increase = 434$ 10.0% 43$ 54$ 326$ Vehicle Miles Traveled Fee on Light Duty Vehicles (All Miles) 1¢/VMT = 26,891$ 2.0¢ 53,781$ 55,852$ 335,111$

Matrix of Illustrative Surface Transportation Revenue Options(all revenue estimates in $ millions)

Funding MechanismsMechanism Yield

2014

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Fuel taxes (all states + DC + PR); 6 index; largest single source of highway funds used by half the states

Sales taxes on fuel, or other taxes on distributors or suppliers (14 states + PR)

Motor vehicle or rental car sales taxes (29 states) Vehicle registration, license or title fees (48 states + PR) Vehicle or truck weight fees (37 states) Tolls (24 states + PR, plus non-state toll entities) General funds (34 states + DC; Vt. on occasion) Interest income (37 states + DC + PR) Other (40 states + DC + PR)

Source: National Conference of State Legislatures

STATES HAVE LONG RELIED ON VARIOUS REVENUE SOURCES TO INVEST IN TRANSPORTATION

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• Tools that borrow against or leverage state revenues for surface transportation projects:o General obligation or revenue bonds (44 states + DC + PR)o GARVEE bonds (33 states + DC + PR)o Private Activity Bonds (PABs) (6 states) o TIFIA federal credit assistance (12 states + PR)o State infrastructure banks (SIBs) (34 states + PR)o Public-private partnerships (PPPs or P3s) (authorized in 33 states +

PR)o Design-build (authorized in 38 states + PR)

Source: National Conference of State Legislatures

STATES ALSO UTILIZE VARIOUS FINANCING TOOLS TO ACCELERATE PROJECT DELIVERY

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STATES ARE LEADING THE WAY ON MEETING THE TRANSPORTATION REVENUE CHALLENGE

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• Raising fuel taxes: California, Idaho, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, Pennsylvania, Utah, Vermont, West Virginia, Wisconsin, Wyoming

• Directing gas tax proceeds to direct transportation uses: Indiana

• Reducing gas tax, but increasing other taxes for a net increase for transportation: Pennsylvania, Virginia

CURRENT STATE TRANSPORTATIONREVENUE DISCUSSIONS

(SUCCESSFUL STATES IN UNDERLINE)

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• State sales tax toward transportation: Arkansas, Idaho, Virginia, West Virginia

• Sales taxes on fuel, or other variable taxes/fees: District of Columbia, Idaho, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Pennsylvania, South Carolina, Utah, Virginia, West Virginia, Wisconsin

• Vehicle registration fees: Idaho, Michigan, New Hampshire, Pennsylvania, Virginia, West Virginia, Wisconsin

CURRENT STATE TRANSPORTATIONREVENUE DISCUSSIONS

(SUCCESSFUL STATES IN UNDERLINE)

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• Vehicle Miles Traveled Fee (VMT) pilot projects: Oregon

• Framework to study a VMT fee: Arizona, Florida, Washington, Wisconsin

• Special fees or taxes for electric or alternative fuel vehicles: Arizona, Virginia, Washington, West Virginia

Source: National Conference of State Legislatures.

STATE TRANSPORTATION REVENUE DISCUSSIONS(SUCCESSFUL STATES IN UNDERLINE)

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• Needs are reasonable and relatable to the public

• Potential benefits of investment are clear• Political leadership from the executive

branch• Broad coalition of supporters beyond self-

interested groups

SOME COMMON THEMES BEHIND STATE SUCCESS STORIES

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28Source: American Road and Transportation Builders Association

ILLUSTRATIVELY, SHORING UP HTF WOULD NOT PRESENT AN UNREASONABLE BURDEN• Average household pays $46 in federal and state gas

tax per month. This is less than per monthly cost of:o Electricity and gas: $160o Cell phone: $161o Cable and internet access: $124

• For example, a 10-cent increase in the federal gas tax translates to $1.15 more for the average driver per week—an action that would fix the Highway Trust Fund shortfall

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AASHTO’S REAUTHORIZATION STRATEGY ON REVENUE AND FUNDING

• Engagement: State DOT leaders educating Congressional members and staff on value of federal investment

• Support: Providing technical assistance to Congressional committees

• Flexibility: “All options are on the table”: Remain agile to take advantage of window of opportunity

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KEY TRANSPORTATION FUNDING AND FINANCE RESOURCES

• Transportation Governance and Finance: A 50-State Review of State Legislatures and Departments of Transportation from AASHTO and NCSL

• Final Report of the National Surface Transportation Infrastructure Financing Commission

• 2010 Conditions and Performance Report from USDOT• AASHTO Center for Excellence in Project Finance• FHWA Office of Innovative Program Delivery• NCSL Transportation Funding and Finance Legislation Database• NCSL Public-Private Partnerships for Transportation: A Toolkit for

Legislators

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PRACTIONERS NEED YOUR HELP!Research assistance is needed on:• Clear demonstration of how much users pay, and what they

get from the transportation system for what they pay• Tangible examples of economic benefits due to investment

in transportation• Translation of complex financing concepts and jargon into

everyday language• Up-to-date information on transportation funding and

various system statistics, both at the federal and state level

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CONCLUSION

“Together, the united forces of our communication and transportation systems are dynamic elements in the very name we bear—United States. Without them, we would be a mere alliance of many separate parts.”

President Dwight D. EisenhowerFebruary 22, 1955

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QUESTIONS?