The administration also proposed new incentives for private investment in projects and developing a 30-year transport assessment.
President Barack Obama used part of his State of the Union address Tuesday night to push issues of importance to the freight transportation sector – infrastructure and trade.
Most infrastructure in the U.S. – energy, waste water, highways, bridges, pipelines, locks and dams – is reaching the end of its design life. The poor condition of major highway arteries and the lack of capacity in certain areas is causing delays and costing commuters time and money. Experts estimate the nation must invest hundreds of billions of dollars to bring the highway system to a state of good repair.
Infrastructure investment, Obama said, serves as a building block for the economy, creating higher paying middle class jobs, and American competitiveness. He urged Congress to pass a surface transportation reauthorization bill that provides funding to reinvest in roads and bridges.
“Twenty-first century businesses need 21st century infrastructure – modern ports, and stronger bridges, faster trains and the fastest Internet. Democrats and Republicans used to agree on this. So let’s set our sights higher than a single oil pipeline. Let’s pass a bipartisan infrastructure plan that could create more than 30 times as many jobs per year, and make this country stronger for decades to come,” he said, taking a slight jab at Republican support for the controversial Keystone XL pipeline.
He indirectly reiterated last-year’s GROW America Act proposal to bolster the Highway Trust Fund with new revenue generated from corporate tax reform. The HTF is used to pay for highway upgrades and repairs, but receipts from motor fuel taxes have not kept pace with previously scheduled construction projects because people are driving less and using more efficient vehicles. Fuel taxes have not been adjusted since 1993.
Under the Obama proposal, $150 million could be generated over four years from closing tax loopholes for companies operating overseas. But the incentives for companies to repatriate profits only represents a one-time infusion of money and not a sustainable revenue stream for the Highway Trust Fund, which no longer can stand on its own as a funding mechanism for highway, bridge and transit projects in the face of declining gas tax receipts caused by more fuel-efficient cars and population shifts to urban centers. The administration says its plan would increase the account for highway improvement and safety programs by 22 percent.
Obama has opposed raising the gasoline and diesel taxes, saying to do so would provide economic hardship to low-and-middle income Americans during times of economic uncertainty. The motor fuel taxes have remained the same 18.4 and 24.4 cents per gallon, respectively, since 1993. The business community has long expressed willingness to see user fees rise as long as the money goes to improve the roads and is not diverted for frivolous projects. Some Republican senators have recently said they are willing to consider a gas tax hike, at least as a temporary funding bridge until some new revenue streams can be developed.
Federal highway aid to states could be in jeopardy this year if Congress doesn’t act. An $11 billion stop-gap funding measure to keep the Highway Trust Fund solvent expires at the end of May. The nine-month extension of surface transportation programs was designed to give lawmakers more time to agree on a long-term bill that identifies new funding streams because, at the time, opposition remained strong against a gas-tax hike and members of Congress were preoccupied with the upcoming elections. Little progress has been made so far on that front, so Congress likely will have to address the shortfall in the HTF and then debate a multi-year reauthorization bill.
Congress has had to bailout the HTF with $61 billion in transfers from the General Fund since 2009. Transportation advocates worry that the transportation system could lose out if it has to compete with other federal programs within a limited budget rather than having a robust, dedicated stream of revenue.
The collapse Monday of part of an overpass being demolished on I-75 in Ohio, which killed one worker and nearly crushed the cab of a J.B. Hunt Intermodal tractor trailer, drew more attention to the plight of the nation’s roads and bridges, but the cause of the accident is still under investigation.
One in nine bridges are rated as structurally deficient and 32 percent of roads are in poor or mediocre condition, according to the American Society of Civil Engineers.
On Friday, the White House announced a plan for qualified infrastructure bonds to attract private investment to help spur large infrastructure projects, the first steps to implement last July’s Build America Investment Initiative, aimed at facilitating partnerships with private investors, states and local governments.
The idea is to use executive branch tools – accelerated credit assistance, expedited permitting and targeted grants for projects with non-federal partners – to improve project delivery while waiting for Congress to follow up with a adequately funded multi-year surface transportation authorization bill. Officials say they want to supplement, not replace, public money with private investment where it makes sense.
Qualified public infrastructure bonds will expand the scope of private activity bonds to include financing for airports, ports, mass transit, solid waste disposal, sewer and water, as well as for surface transportation projects. Unlike PABs, the qualified infrastructure bond program will have no expiration date, no issuance caps and interest will not be subject to the alternative minimum tax.
Last week, Obama’s transportation secretary previewed the coming release of a 30-year scoping exercise called “Beyond Traffic” designed to provide a look at the long-term trends and forces impacting transportation across all modes and the policy choices that will face decision-makers.
But in a speech at the annual Transportation Research Board conference in Washington, Secretary of Transportation Anthony Foxx stressed that the white paper is not a transportation plan and makes no recommendations for how to address the issues it lays out.
Understanding trends such as population shifts and urbanization will help inform decisions policy makers and stakeholders make today, he explained.
The draft white paper will be issued in a few weeks and the Transportation Department will then accept public comments before producing a final report, Foxx said.
In his State of the Union speech, Obama also urged Congress to pass legislation giving him Trade Promotion Authority as the administration negotiates key multilateral free trade agreements in the Pacific and Europe. TPA is a tool designed to give presidents more bargaining power negotiating trade deals because Congress must vote up-or-down on the final agreement, without the ability to rewrite any of the terms. TPA expired in 2007.
Concluding a Trans-Pacific Partnership Agreement would set the bar for trade rules in the Asia-Pacific region, rather than giving China a clear path to set trade terms with lower standards, Obama said.
“Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense,” Obama said. “But 95 percent of the world’s customers live outside our borders. We can’t close ourselves off from those opportunities. More than half of manufacturing executives have said they’re actively looking to bring jobs back from China. So let’s give them one more reason to get it done.”
Business groups praised the President’s comments on infrastructure and trade, but were less supportive of other parts of his agenda, including taxes.
Obama highlights infrastructure, trade in State of Union address
