Freight Infrastructure Financing

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1 Opprtunities in Freight Infrastructure Financing Jung H. Lee Assciate Directr fr Finance and Business Develpment American Assciatin f State Highway and Transprtatin Officials 1 Deputy Directr AASHTO Center fr Excellence in Prject Finance

2 2 Sessin Objectives T prvide the natinal cntext n transprtatin funding and financing T discuss the plicy and finance recmmendatins fr freight frm tw Cngressinally authrized natinal cmmissins and the Huse Transprtatin Cmmittee T prvide AASHTO s freight funding and financing framewrk fr the future T update n the current state f play at the Federal level

3 Current Trends and Challenges 3

4 4 Transprtatin Spending Cuts in 19 States in FY 2010 Arizna Califrnia Delaware Gergia Idah Illinis Luisiana Massachusetts Maine Michigan Surce: Natinal Assciatin f State Budget Officers Minnesta Nrth Carlina New Jersey New Yrk Suth Carlina Utah Virginia West Virginia Washingtn

5 5

6 6 American Recvery and Reinvestment Overall Features Act (ARRA) f 2009 $48.12 billin t USDOT 100 percent Federal share Maintenance f effrt required Peridic reprting f ecnmic impact f stimulus spending $1.5 billin in TIGER discretinary grants (Up t $200 millin fr TIFIA credit assistance)

7 Status f ARRA Implementatin USDOT received $56.6 billin in prject funding request fr $1.5 billin TIGER discretinary grant prgram Surce: Transprtatin Weekly

8 May-09 Aug-09 3,060 3,040 3,020 3,000 2,980 2,960 2,940 2,920 2,900 2,880 2,860 2,840 Vehicle Miles Traveled - August 2004 t August 2009 (Mving 12 Mnth Ttal) Nv-04 Feb-05 May-05 Aug-05 Nv-05 Feb-06 May-06 Aug-06 Nv-06 Feb-07 May-07 Aug-07 Nv-07 Feb-08 May-08 Aug-08 Nv-08 Feb-09 Aug-04 (Billins f Miles)

9 Surce: Federal Highway Administratin

10 Reduced Highway and Transit Prgram Levels Highways Transit ($ billins) Nte: Baseline prjectin frm FY 2010 Budget using CBO Summer 2009 baseline receipts estimates

11 Purchasing Pwer Lss f the Highway Prgram (Billins) $60 $50 $40 $30 $20 $32.5 $42.0 $51.8 $55.0 $10 $- FY 2003 Funding Level Actual Enacted as f May 2008 FY 2003 Inflated fr Cst Increases (PPI) Yung- Oberstar $375 Billin Prpsal Surce: Transprtatin Weekly

12 AASHTO Bttm Line Reprt: Trends VMT increase 2.4 trillin miles in trillin miles in trillin miles currently Ppulatin increase 305 millin in millin 2050 Truck freight expected t increase by 100% by

13 AASHTO Bttm Line Reprt: Needs Highway Investment Requirements Passenger vehicle demand parallels ppulatin grwth (1% per year) Truck freight demand parallels ecnmic grwth (2 t 3% per year) Grwth in VMT will at least equal ppulatin grwth Current spending is $78 billin Grwth Rate f VMT Per Year Cst t Imprve Highways (2006 Dllars) 1.4 percent $166 billin percent $132 billin

14 Surface Transprtatin Authrizatin 14

15 NATIONAL SURFACE TRANSPORTATION POLICY AND REVENUE STUDY COMMISSION 15

16 Overall Findings We need a clear, cmprehensive, well articulated, and widely understd strategic visin Federal prgram be cnslidated and refrmed t address bjectives f genuine natinal interest 16

17 Freight Rail Findings Freight tn mile expected t increase by 92% ver next 30 years $272 billin in new capital investment needed thrugh 2055 ($5.7 billin per year) t meet needs Class I capital expenditure was $1.4 billin in

18 18 Cmmissin Recmmendatins the Cmmissin recmmends that a prtin f Custms duties be dedicated t help pay the csts f freight related imprvements. The Cmmissin recmmends that a Federal Investment Tax Credit be granted t transprtatin facility wners fr capital imprvements.

19 NATIONAL SURFACE TRANSPORTATION INFRASTRUCTURE FINANCING COMMISSION 19

20 Existing Revenue Surces 20 Existing Federal Truck related Taxes ($14.4 billin in revenues in ) Diesel taxes Heavy Truck and Trailer Sales Tax Truck Tire Tax Heavy Vehicle Use Tax Trucking industry paid $19.6 billin in state highway user taxes, accunting fr 27.8% f ttal highway user based taxes cllected

21 21 Ptential Revenue Surces T prduce $1 billin Custms Duties and Fees 3.5% surcharge Freight Waybill Tax 0.16% tax n all truck freight waybills Weight Distance Tax.08 cent per tn mile Cntainer Tax $20 per cntainer Harbr Maintenance Tax Additinal.089% t current ad valrem tax rate

22 Surface Transprtatin Authrizatin Act f

23 23 Surface Transprtatin Authrizatin Act f 2009 Funding Ttal funding $450 billin; a$500 billin with High Speed Rail $337.4 billin in Highway investment $100 billin fr Capital Asset Imprvement (NHS, IM, Bridge) $50 billin fr Metrplitan Mbility and Access (MMA) $25 billin fr Prjects f Natinal Significance $162.4 billin fr ther FHWA administered prgrams (e.g. Highway Safety Imprvement, Surface Transprtatin, CMAQ, Freight, etc) $99.8 billin transit $87.6 billin frm HTF HTF share was 15.2% in SAFETEA LU; it is increased t 19.5% in STAA $12.2 billin frm GF $50 billin high speed rail crridrs $12.6 billin Mtr Carrier Safety

24 Surface Transprtatin Authrizatin Act f 2009 Specific authrizatins are nt included in the bill nr are the apprtinment frmulas While the tp line numbers are in the bill there is n specific breakdwn by categry and n frmulas r runs that wuld shw state shares r return n cntributins There is n revenue title t be bill yet 24

25 25 STAA Freight Imprvement Prgram Managed by the Federal Highway Administratin Establishes a dedicated surce f funding fr freight related highway prjects Requires States t cnsider their freight transprtatin needs in a strategic, statewide cntext Institutes new perfrmance measures t fcus State effrts n imprving the speed and reliability f freight mvement Requires States t inventry and assess the cnditin f secndary freight rutes

26 26 STAA Freight Funding Prvides state frmula grant funding fr freight and gds mvement prjects and fr imprving States ability t cnduct freight planning. T supprt Freight Imprvement, States will receive frmula apprtinments funded by cntract authrity derived frm the Trust Fund.

27 27 Surface Transprtatin Authrizatin Act f 2009 Natinal Infrastructure Bank / Metrplitan Infrastructure Bank N details n the NIB Metrplitan Infrastructure Bank (Sectin 1304) Prvides federal credit assistance fr prgrams f prjects within individual metrplitan areas participating in the MMA prgram Allws DOT t enter int cperative agreements with MPOs t create the MIBs TIFIA prgram (Sectin 1302) Authrizes credit supprt up t 49 percent frm 33 percent

28 AASHTO s Vastly Expanded Funding Prpsal 28

29 29 Legislative Recmmendatins Between 2010 and 2015, in rder t invest in a rbust surface transprtatin prgram t meet significant natinal needs, Cngress shuld fund a $545 billin multimdal prgram cmprised f: Highway prgram funded at $375 billin (2015 level = $75 billin) Transit prgram funded at $93 billin (2015 level = $18.5 billin) Freight prgram funded at $42 billin (2015 level = $9 billin) Intercity passenger rail prgram funded at $35 billin (2015 level = $7.0 billin)

30 30 Legislative Recmmendatins Federal gvernment must cntinue t play a strng rle in investing and maintaining an integrated and multimdal natinal surface transprtatin system States and lcal gvernments shuld be prvided with maximum flexibility t use federal revenues frm existing cre surces t meet systemic transprtatin needs Strng accuntability measures must accmpany substantially increased funding t ensure resurces are spent as efficiently and effectively as pssible We need t restre purchasing pwer by making sure the impact f inflatin n cmmdities and cnstructin csts must be addressed in setting investment levels

31 31 Legislative Recmmendatins Adpt a lng range apprach t funding the surface transprtatin system that gradually mves away frm dependence n the current mtr fuels tax t a distance based direct user fee such as a fee n vehicle miles traveled Assure that any climate change legislatin that creates a new revenue surce, either thrugh a carbn tax r cap and trade, prvides substantial funding fr transprtatin Eliminate r drastically limit earmarking in federal transprtatin prgrams

32 Menu f Optins 32 Cre Prgram Funding Optins Indexing existing and new Highway Trust Fund Surces beginning in 2010 Increasing the gas tax by the equivalent f 10 cents per galln Increasing the diesel tax by the equivalent f 13 cents per galln Issuing tax credit bnds t finance surface transprtatin prgrams Discntinuing mtr fuel tax exemptin reimbursement Reinstituting cllectin f interest n Highway Trust Fund balances Allcating prtins f any carbn tax r cap and trade auctin prceeds fr transprtatin reflective f the sectr s impact n greenhuse gas emissins thrugh investment in transit, passenger rail and freight mbility

33 Menu f Optins Freight Prgram Funding Optins ( Outside the Highway Trust Fund ) Dedicating a share f custms fees fr transprtatin purpses Enacting a bill f lading charge fr all highway and rail freight, t be dedicated fr freight infrastructure imprvements Enacting cntainer fees in supprt f freight needs Including a dedicated surce f revenue utside the Highway Trust Fund t supprt a Freight Crridrs prgram Prviding authrity fr tlling where determined by States t be an apprpriate funding slutin 33

34 34 State Freight Netwrk Fund Cngress shuld create a state administered, federally supprted freight transprtatin infrastructure investment prgram funded at an average level f $3 billin apprtined annually ver the term f the authrizatin Fund wuld prvide states with flexible resurces t supprt state freight plans develped by state transprtatin agencies and MPOs State plans wuld prvide fr strategic investment strategies t cnnect with natinal and reginal freight netwrks Funds wuld be flexible and multi mdal t achieve maximum system integratin

35 Natinal/Reginal Freight Crridr Fund Cngress shuld create a fund frm new surces f revenue fr investment in high return prjects n natinal freight crridrs 35 Funding at least $4 billin annually, $2 billin t be apprtined t states and $2 billin t be allcated by the U.S. DOT A prtin f these funds shuld be prvided t stateinitiated rganizatins respnsible fr planning and investing in multi state, multi mdal crridrs

36 36 Investment Tax Credit Cngress shuld authrize an investment tax credit fr Class 1 freight rail prjects that create needed new capacity in pririty crridrs and generate significant public benefits Cngress shuld als reauthrize the investment tax credit fr capital investment in shrt line and reginal railrads

37 37 Reauthrizing Existing Prgrams Cngress shuld reauthrize the fllwing prgrams: Transprtatin Infrastructure Finance and Innvatin Act amendments (TIFIA) Sec Extend Reginal Railrad Tax Credits State Infrastructure Banks amendments Sec Private Activity Bnds fr Intermdal Facilities Sec Capital Grants fr Rail Line Relcatin Prjects Sec Rail Rehabilitatin and Imprvement Financing amendments (RRIF) Sec Rail Highway Crssings Sec. 130

38 Surface Transprtatin Funding Optins Matrix (all revenue estimates in $millins) Annual Average Annual Ttal Mechanism Yield Illustrative Revenues Revenues Revenues Funding Mechanisms (2010) Rate Annual Highway Miles Traveled Fee (Cars Only) 1 /VMT = $ 17, $ 17,298 $ 17,616 $ 105,696 Annual Highway Miles Traveled Fee (All light duty vehicles) 1 /VMT = $ 27, $ 27,610 $ 28,682 $ 172,094 Annual Highway User Vehicle Fee $1.00 Fee = $ 263 $1.00 $ 263 $ 275 $ 1,652 Carbn Tax r Cap And Trade Auctin Prceeds 1 /gal r equiv = $ $ 16,594 $ 17,250 $ 103,501 Cntainer Tax $1 per TEU = $ 57 $20.00 $ 1,137 $ 1,336 $ 8,013 Diesel Tax Increase Plus Indexing 1 /gal = $ $ 5,337 $ 5,976 $ 35,856 Existing Highway Trust Fund Surces $ 40,566 $ 42,569 $ 255,413 Gas Tax Increase Plus Indexing 1 /gal = $ 1, $ 13,796 $ 15,082 $ 90,489 General Fund Supprt fr Intercity Passenger Rail $ 3,000 $ 3,000 $ 18,000 General Fund Transfers fr Transit $ 3,167 $ 3,167 $ 19,000 Index Existing Highway Trust Fund Surces Beginning in 2010 $ 791 $ 3,032 $ 18,192 Index Heavy Vehicle Use Tax Retractively t 1997 $ 411 $ 536 $ 3,217 Interest n Highway Trust Fund Balances $ 200 $ 200 $ 1,200 Mtr Fuel Tax Exemptin Reimbursement (Retractive and Future) $ 1,057 $ 1,099 $ 6,593 Sales Tax n Mtr Fuels 1.0% f Sales = $ 6, % $ 15,340 $ 15,658 $ 93,949 Share f US Custms Revenues 1% f Receipts = $ % $ 1,570 $ 1,817 $ 10,904 Tax Credit Bnds fr Highways and Transit $ 8,333 $ 8,333 $ 50,000 Tax Credit Bnds fr Intercity Passenger Rail $ 4,167 $ 4,167 $ 25,000 Tn Freight Charge -- All Mdes 1 /tn = $ $ 1,617 $ 1,801 $ 10,804 Tn Freight Charge -- Truck Only 1 /tn = $ $ 1,115 $ 1,242 $ 7,452 Tn-Mile Freight Charge -- All Mdes 1 /tn-mile = $ 42, $ 4,276 $ 4,763 $ 28,579 Tn-Mile Freight Charge -- Truck Only 1 /tn-mile = $ 12, $ 1,252 $ 1,394 $ 8,365 US Freight Bill -- All Mdes 1% f Sales = $ 7, % $ 7,708 $ 8,585 $ 51,513 US Freight Bill -- Truck Only 1% f Sales = $ 6, % $ 6,497 $ 7,237 $ 43,420 Vehicle Sales Tax n New Passenger Cars/Light-duty Trucks 1% f Sales = $ 4, % $ 9,707 $ 10,812 $ 64,870 Vehicle Sales Tax n New/Used Passenger Cars/Light-duty Trucks 1% f Sales = $ 9, % $ 18,024 $ 20,077 $ 120,461 Ttal Revenues $ 210,831 $ 225,705 $ 1,354,232

39 Prpsed Prgram Funding Levels t Restre Purchasing Pwer Ptential Prgram Name TOTAL Preservatin and Renewal $28.00 $30.80 $33.60 $36.40 $39.20 $42.00 $ Highway Freight (Based n Existing Revenues) $2.40 $2.64 $2.88 $3.12 $3.36 $3.60 $18.00 Highway Safety Imprvement Prgram $2.60 $2.86 $3.12 $3.38 $3.64 $3.90 $19.50 Operatins $2.40 $2.64 $2.88 $3.12 $3.36 $3.60 $18.00 Transprtatin System Imprvement/Cngestin Reductin $11.10 $12.21 $13.32 $14.43 $15.54 $16.65 $83.25 Envirnment Prgram $3.50 $3.85 $4.20 $4.55 $4.90 $5.25 $26.25 TOTAL - Highways $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $ TOTAL - Transit $12.5 $13.7 $14.9 $16.1 $17.3 $18.5 $93.00 TOTAL - Freight (Based n New Revenues Outside f Highway Trust Fund) $5.0 $5.8 $6.6 $7.4 $8.2 $9.0 $42.00 TOTAL - Intercity Passenger Rail $5.0 $5.3 $5.6 $5.9 $6.2 $7.0 $35.00 GRAND TOTAL $72.50 $79.80 $87.10 $94.40 $ $ $545.00

40 40 Current State f Play The gd news: a high pririty given t infrastructure by the new Administratin The creatin f new law is underway and we have excellent Cngressinal leadership The bad news: the Highway Trust Fund has gne brke There is n supprt fr increasing user fees There are many cmpeting gals at the natinal level

41 Current State f Play 41 Obama Administratin s Stage I Reauthrizatin Dwn Payment n Refrm Duratin: 18 mnths $20 billin General Fund transfer t Highway Trust Fund Principles Revenue neutral general fund transfers t address Highway Trust Fund slvency State and MPO capacity building measures ($300 millin) Emphasis n reginal mbility and access and livability

42 42 Current State f Play Huse Extensin (HR 3617) Duratin: 3 mnths (t 31 December 2009) Maintains FY 2009 pre rescissin spending level $ billin; $ billin fr FHWA N repeal f $8.708 billin rescissin f cntract authrity Passed Huse Senate Extensin Duratin: 6 mnths (t 30 April 2010) Maintains FY 2009 pre rescissin spending level Restres $8.708 billin in cntract authrity Htlining fr unanimus cnsent failed

43 43 Current State f Play Cntinuing Reslutin (HR 2996) Duratin: 1 ½mnths (t 18 December 2009) Prvides FY 2009 POST rescissin budget authrity 32 percent less than HR 3617 r $2.03 billin per mnth N restratin f rescinded $8.708 billin cntract authrity Enacted n 30 Octber 2009

44 44 Current State f Play There is great uncertainty right nw Brader variables: unemplyment situatin and deficit spending appetite It is imprtant t pass the six year authrizatin bill sn, as state DOTs and cntractrs depend n lng term investment time hrizns Any actin shuld nt reverse the prgress made thrugh the stimulus legislatin

45 Thank Yu Jung H. Lee Assciate Directr fr Finance and Business Develpment AASHTO American Assciatin f State Highway and Transprtatin Officials 444 Nrth Capitl Street NW, Suite 249 Washingtn, DC Phne: (202) Fax: (202) [email protected] Web: 45

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