Revisions to Federal Transportation Project Grant Program Encourages Use of P3s

The federal grant program that provides funding for freight and highway projects throughout the country has been revised to support projects that use funding from the private sector or other nonfederal sources.

The Fostering Advancements in Shipping and Transportation for the Long-Term Achievement of National Efficiencies (FASTLANE) program has been renamed the Infrastructure for Rebuilding American (INFRA) program, the U.S. Department of Transportation’s Build America Bureau announced recently. Congress authorized FASTLANE to receive $4.5 billion over five years under the Fixing America’s Surface Transportation (FAST) Act of 2015 to provide competitive grants or credit assistance to nationally and regionally significant freight and railway projects beginning in 2016.

The INFRA program will provide approximately $710 million in FY 2017 and up to $855 million in FY 2018, according to a July 5 Federal Register notice. The INFRA program will evaluate projects using updated criteria to ensure that they meet national and regional economic vitality goals and encourage the use of nonfederal funding and innovation in the project delivery and permitting processes, including P3s. The program’s revisions could provide some insight into the approach President Trump could take in proposing a $1 trillion infrastructure funding package later this year, reported The Hill.

Each large project that is selected for funding will receive at least $25 million; each small project will receive a minimum of $5 million, and 10 percent of available funds will be reserved for small projects for each fiscal year of funding. The INFRA program preserves the FAST Act’s statutory requirement that at least 25 percent of funding be reserved for rural projects.

Projects eligible for funding include reconstruction, rehabilitation, property acquisition, environmental mitigation, equipment acquisition and operational improvements that affect system performance.

Applicants can resubmit previously submitted FASTLANE applications but must explain how these projects competitively address the INFRA grant criteria. Applications are due Nov. 2.

This week in Congress.

The Senate will consider resolutions of disapproval under the Congressional Review Act (CRA) and confirmation of the president’s appointees to federal agencies. The House will be taking up litigation reform legislation and appropriations legislation to fund the Defense Department through the remainder of fiscal year 2017. The highest profile activity in Congress this week, though, is expected to take place in the House which plans to mark up the legislation to begin to repeal and replace the Affordable Care Act.

The Senate will return on Monday afternoon, when votes are expected on two resolutions of disapproval of federal regulations issued in the final months of the Obama administration under the CRA. The first vote will be on H.J. Res. 37 to disapprove a rule from the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration revising provisions of the Federal Acquisition Regulation to require federal contractors to disclose findings of noncompliance with labor laws. The Senate is then scheduled to vote on the motion to proceed to H.J.Res 44, a resolution of disapproval of the Bureau of Land Management’s Resource Management Planning rule, finalized in December 2016. The regulation establishes the procedures used to prepare, revise or amend land use plans pursuant to the Federal Land Policy and Management Act of 1976, but congressional Republicans, state and local governments, and affected property owners have argued that the new process creates more confusion and greater uncertainty. The White House has announced support for both resolutions of disapproval, indicating the president would sign them into law upon Senate passage (both resolutions have already been approved by the House).

Senate floor activity for the remainder of the week is uncertain. It is possible the majority leader will initiate action on the nomination of Seema Verma to serve as Administrator of the Centers for Medicare and Medicaid Services. The nomination was advanced by the Senate Finance Committee last Thursday on a straight party-line vote.

On the other side of the Capitol, the House will return to legislative business on Tuesday, when members will consider seven bills, including five measures under the jurisdiction of the Transportation and Infrastructure Committee, under suspension of the rules.

On Wednesday, House members will consider three additional bills under suspension of the rules, all reported by the Natural Resources Committee.

The House will then take up H.R. 1301, the Department of Defense Appropriations Act for FY 2017, subject to a rule. The funding bill would replace the Department of Defense provisions of the current continuing resolution for FY 2017, which is set to expire on April 28, and provide funding through the end of this fiscal year, which ends on Sept. 30. The legislation meets the overall defense spending limits set by law for FY 2017, providing $516.1 billion for base budget needs. The bill also provides $61.8 billion in Overseas Contingency Operations funding, which is the level allowed under current law. These amounts are also in line with the National Defense Authorization Act signed into law by President Obama in December. Unlike the Defense Appropriations bill that passed the House on a party-line vote last summer, this version of the defense spending bill maintains statutory budget limits. As a result, it is likely to garner more bipartisan support for House passage in this session of Congress. Press reports indicate the Trump administration is preparing to request an additional $30 billion in supplemental funding for the Department of Defense in FY 2017, largely for readiness spending, but it remains unclear how Congress will respond to any supplemental appropriations request. It also remains unclear how or when Congress will deal with funding for the 10 remaining FY 2017 spending bills before the continuing resolution expires on April 28.

During the remainder of the week, House members will consider three pieces of litigation reform legislation reported out of the House Judiciary Committee. Each will come to the floor under a rule.

On Thursday, the House will take up two of these measures. H.R. 725, the Innocent Party Protection Act, limits the ability of federal courts to remand cases to state court under certain circumstances. Members will also consider H.R. 985, the Fairness in Class Action Litigation Act of 2017. The bill includes language from a previous class action reform proposal, which passed the House in 2016, to prohibit federal courts from certifying any proposed class under Rule 23 of the Federal Rules of Civil Procedure unless the party seeking to maintain a class action demonstrates that each member of the proposed class suffered an injury of the same type and scope. This version of the legislation also includes some additional provisions related to class action litigation, including disclosure requirements on third-party litigation financing.

The third litigation reform bill will be considered on Friday. H.R. 720, the Lawsuit Abuse Reduction Act of 2017, would amend Rule 11 of the Federal Rules of Civil Procedure to make the imposition of sanctions for violations of the rule mandatory, not discretionary as under current law.

Also this week, House Republican leaders are expected to release their proposal to repeal and replace the Affordable Care Act.  Once the bill is released, committee action is on tap, with markups this week, and prompt floor action can be expected as early as next week.

With all committees now organized, both chambers are facing busy hearing schedules.

 

Commentary on Debate: How to Fix America’s Infrastructure

Monday night’s presidential debate included some instructive moments even for their repetitiveness; other moments were mere distracting distortions.

We have been writing about the need to upgrade America’s infrastructure it seems almost weekly. But only tangentially was the issue raised during the debate. Donald Trump, among his bill of particulars defining the trouble the Obama administration has ushered in over the past eight years, mentioned the sorry state of U.S. airports and compared them unfavorably to similar facilities in Asia.

“Our airports are like from a third-world country. You land at LaGuardia, you land at Kennedy, you land at LAX, you land at Newark and you come in from Dubai and Qatar and you see these incredible — you come in from China — you see these incredible airports and you land — we’ve become a third-world country,” Trump observed.

As Kim Day, the CEO of Denver International Airport, noted in an Op-Ed forThe Denver Post on the 20th anniversary of the local airport’s opening: “DIA is an economic powerhouse for Colorado, growing its initial annual economic impact of $3.1 billion to an estimated $26.3 billion in 2013. The airport supports nearly 190,000 jobs, and is on track to be even more impactful in the years to come.”

It’s not a perfect picture, of course, as cost overruns for project expansions, including a new train station and a hotel, well illustrate.

Nevertheless, a decision made 27 years ago to spend more than $2 billion on a new airport — the only major new one built in the U.S. since 1974 — has helped diversify Colorado’s economy and spurred broader growth.

Airports are certainly one area in which we can use an upgrade. We also need more and newer bridges, roads, and tunnels. And we need to upgrade the electrical grid. And we need to improve and update our port facilities.

The problem with the United States’ infrastructure is much broader than failing airports and bridges. The nation’s roads are congested and full of potholes. In 2014, the typical urban commuter spent 42 hours stuck in traffic, up from 20 hours in 1984. Americans consumed over three billion gallons of gas as they sat in grid­lock for almost seven billion hours, at a cost of $160 billion in wasted fuel and time.

Hydration is absolutely essential, and yet we continue to ignore the state of the infrastructure that delivers it to us. In its 2013 Report Card for America’s Infrastructure, the American Society of Civil Engineers gave our “drinking water” assets a “D.”

According to Professor Robert Glennon of the University of Arizona:

Our water infrastructure consists of approximately 54,000 drinking water systems, with more than 700,000 miles of pipes, and 17,000 wastewater treatment plants, with an additional 800,000 miles of pipes. A 2012 report of the American Water Works Association concluded that more than a million miles of these pipes need repair or replacement. That’s why communities across the nation suffer 240,000 water main breaks per year. The major cause of pipe failure is age.

Disease and death follow from poorly conceived and maintained water infrastructure.

The root of the crisis is clear: the United States has underinvested in its infrastructure. The federal gas tax is the main source of federal funding for roads, bridges, and subways. But Washington has not increased that tax, of 18.4 cents per gallon, since 1993; in real terms, its value has thus fallen by over 40 percent. Expert groups such as the American Society of Civil Engineers, business associations such as the U.S. Chamber of Commerce, and unions such as the AFL-CIO have all called for trillions of dollars of new investment. But Washington has failed to act.

The problems that plague American infrastructure are deep-seated and complex. Yet there is a way out. Washington and the public must recognize that world-class infrastructure does not come cheap. High-quality infrastructure is vital to global economic competitiveness, and the United States is falling behind. The United States invests less than two percent of its GDP in infrastructure; Europe, by contrast, invests five per­cent. Furthermore, the bureaucratic system that oversees public infrastructure spending has become hopelessly “siloed,” with separate agencies at each level of government dedicated to different modes of transport. Each has its own stakeholders, champions, and opponents. It’s a wasteful, inefficient system. Henry Petroski, a professor of civil engineering and history at Duke University in his book “The Road Taken”, claims reforming it will require several steps.

Firstly, governments should eliminate silos. A unified department should merge the federal highway, transit, aviation, maritime, and railroad administrations; the Army Corps of Engineers, which controls investment in ports; and the Environmental Protection Agency’s water programs, which provide federal funding for sewer systems and drinking water. This unified department of infrastructure should incentivize state and local authorities to make smarter choices with federal funding. For instance, it could coordinate the timing of different projects, such as a sewer-line expansion and a road repair, so that the government has to dig only once. It should also consider instituting a so-called corridor-based approach, similar to the one the United Kingdom uses, in which the government evaluates a set of projects designed to solve a particular problem and chooses the most cost effective among them. For example, to improve the flow of people between Washington, D.C., and New York City, policymakers should compare the costs and benefits of investing in highways, high-speed rail, increased airport capacity, and more efficient freight rail and shipping to decide how best to solve the problem, rather than doling out funds to each of the various transportation agencies without coordination.

The United States has reached a fork in the road. It can let its infrastructure crumble, its bridges collapse, and its roads grow ever more congested. While Government at all levels has a tenuous debt-and-deficit situation, government entities can nevertheless also borrow at historically low rates. It makes sense accordingly to lock in cheap money to pay for infrastructure investments with long economic tails. Finally, policymakers should not fear the private sector. Good ideas frequently come from sources outside the government. Cities and states should allow both the public and the private sectors to submit unsolicited proposals for innovative infrastructure projects. Of course, these projects would have to be rigorously and publicly evaluated. But the fact that private companies are motivated by profit is no reason for the government to ignore them.

Sticking Points for Congressional Energy Conferees.

Thursday revealed major sticking points on Energy legislation during the opening meeting of the conference committee to reconcile the House and Senate versions of the Energy Bill.

Those include: funding for infrastructure, drought and wildfire language, and the Land and Water Conservation Fund.

Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-Alaska), who co-authored the Senate bill and serves as chair of the conference committee, urged conferees to “prove the skeptics wrong,” adding that her efforts to pass a bill had been “written off by every trade journal three or four times.”

The Senate passed its bill 85-12 in April, and the House passed an amended version 241-178. The House’s more partisan version included much of the House’s own language on energy efficiency, and it added provisions on contentious issues like the California drought and wildfire management.

The drought language would loosen some requirements of the Endangered Species Act, and the wildfire provision would expedite forest management projects. The provision on drought attracted a veto threat from the White House. The Obama administration also criticized the provision on wildfire but stopped short of a veto threat.

The Senate bill avoided those controversial topics because supporters knew that it would threaten their ability to pass the first update to the country’s energy policy since 2007.

Murkowski’s co-author, committee ranking member Sen. Maria Cantwell (D-Wash.), and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) also gave optimistic opening statements, praising some of the less controversial provisions rather than pushing on the controversial ones.

But the meeting, which allowed most of the 47 conferees to give brief statements, quickly shifted toward a few key issues where members have dug in their heels.

Rep. Frank Pallone (D-N.J.), who had previously expressed his displeasure with both the House and Senate bills, reiterated that he wants to check off three boxes in the final conference report. Pallone wants the final legislation to invest in energy infrastructure, to focus on “direct benefits for consumers,” and to include action on climate change.

Pallone didn’t go into detail on the second and third demands, but he is already dissatisfied with the lack of infrastructure funds in both the House and Senate bills.

After the meeting, Murkowski made no promises, saying conferees would work through the infrastructure issues along with other disagreements.

A few natural resources and land management issues also present challenges. House Natural Resources Committee Chairman Rob Bishop (R-Utah) continued to call for measures addressing the California drought and wildfire management. Cantwell has said that those issues are important, but they should be left out of the energy bill because they’re too contentious to handle now.

The wildfire provision has some bipartisan support on the conference committee. Rep. Peter DeFazio (D-Ore.), who is a conferee, voted for the measure as a standalone bill, and he briefly praised it in his statement on Thursday. Sen. Ron Wyden (D-Ore.) also encouraged members to include language on wildfire management, but he did not mention the House’s measure specifically. Rep. Bruce Westerman (R-Ark.), the bill’s sponsor, is also a conferee.

The Land and Water Conservation Fund is also a sticking point. The Senate bill would permanently reauthorize the fund, but Bishop has said that’s a non-starter without some changes that shift control from the federal government to states. Rep. Cynthia Lummis (R-Wyo.) emphasized her support for similar changes to the conservation fund. Wyden, meanwhile, called permanent reauthorization “a particularly valuable part of the Senate bill.”

Upton has already said he doesn’t think lawmakers will reach a deal before the election. At Thursday’s meeting, Sen. John Barrasso (R-Wy.) accused some House and Senate Democrats, without naming anyone in particular, of dragging their feet.

After the meeting, Murkowski said Barrasso is simply warning members and stakeholders that a new Congress means there will be a full reset on the bill. It would be a waste of the past year’s efforts not to pass something by December.

 

 

New Jersey Transportation Funding- key elements of Senate bill.

The New Jersey state Senate adjourned on Monday before considering any proposals related to renewing transportation funding or cutting taxes. But the Senate is back in session tomorrow, setting the stage for what is expected to be another long day of negotiations.

At the heart of a new bill that was  passed by the state Assembly early Tuesday morning  is a proposed 1 percent reduction of New Jersey’s 7 percent sales tax.The cut would be phased in, starting at 0.5 percent next year and reaching the full 1 percent in 2018. It would come as part of a broader deal to renew the state Transportation Trust Fund (TTF) for another 8 years with a 23-cent gas tax hike.

The proposal featuring the sales-tax cut that has emerged this week actually is an alternative to another bipartisan plan that came out of the state Senate earlier this month.

That plan, sponsored by Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex), also features a 23-cent gas-tax hike, but instead of a sales-tax cut it calls for phasing out New Jersey’s estate tax and making a series of other tax cuts. They include lifting state income-tax exemptions on pensions, 401(k) plans, and other sources of retirement income over the course of several years. The Sarlo-Oroho plan would cost an estimated $870 million once all the cuts were fully implemented.

The new proposal, backed by Governor Christie and Assembly Speaker Vince Prieto (D-Hudson), scraps most of the tax cuts that are included in the Sarlo-Oroho plan in exchange for the sales-tax reduction. It does, however, keep changes to retirement-income exemptions that the two senators proposed, adding another $200 million to the potential cost of the Christie-Prieto plan.

The Senate has yet to consider the proposal, but if it were to be enacted, the sales-tax cut would represent New Jersey’s first reduction of a broad-based tax since 1994. It would also come at a time when the state has been experiencing revenue problems, including a $600 million budget hole that had to be closed with a series of cuts and other adjustments just last month.

The budget impact of the proposed sales-tax cut would start out modestly at $376 million during the 2017 fiscal year. And because it is part of a broader plan that involves the gas-tax increase to shore up the TTF, the cut would initially free up roughly $350 million in sales-tax revenue that’s currently being used to prop up the deeply indebted trust fund.

Going forward, the impact of the sales-tax cut on the budget would rise to an estimated $1.6 billion once fully phased in during the 2019 fiscal year, according to the nonpartisan Office of Legislative Services. Because all of the more than $1 billion in annual revenue that would come in from the 23-cent gas-tax hike would be constitutionally dedicated to funding transportation projects,  the sales tax cut  would not be offset, leaving a gap on the state budget.

Supporters predict that gap would be closed by economic growth, but if that growth doesn’t materialize, the hole would have to be filled with spending cuts or other tax hikes since the state constitution requires a balanced budget.

Complicating the issue even further is a planned constitutional amendment, backed by Democratic legislative leaders and public-worker unions, that call’s for revenue growth to help fund a series of ramped-up state contributions to the presently underfunded public-employee pension system. If voters approve the amendment this fall, it would mandate spending on the pension payments to increase from $1.3 billion this fiscal year to over $3 billion just as the full impact of the sales tax-cut would take effect.

New Jersey’s sales tax is rooted in a 1966 law that established a 3 percent rate. That was increased to 5 percent in 1970, and to 6 percent in 1983. The rate was lifted to 7 percent in 1990 under then-Democratic Gov. Jim Florio, only to be reversed in a backlash in 1992.

Another increase restored the rate to 7 percent in 2006 under then-Democratic Gov. Jon Corzine, but only after a six-day shutdown of state government. At the same time, the range of services that are subject to the sales tax was expanded, though New Jersey still offers exemptions for clothing, groceries and necessities.

Unlike many other states, New Jersey does not allow sales taxes to be levied at the local level. In fact, specially designated Urban Enterprise Zones allow many struggling urban areas to charge a lesser rate of 3.5 percent.

Notably, sales tax collections have been on the rise; while income tax is subject to significant volatility, the sales tax has been a steady performer for the state budget over the last several years. It generated $7.5 billion in revenue during the 2010 fiscal year, and $7.8 billion during the 2011 fiscal year. Sales tax collections then steadily improved from $8 billion during the 2012 fiscal year to $8.8 billion through the 2015 fiscal year. The latest projection for the current fiscal year, which ends at midnight tomorrow, is for $9.3 billion, and Christie’s administration is forecasting a $9.6 billion haul during the 2017 fiscal year.

Nuts and Bolts of New Jersey’s Proposed 10-year, $20B Infrastructure Funding

On Friday we reported that New Jersey State lawmakers announced a bi-partisan agreement to  raise enough revenue to support a decade-long, $20 billion Transportation Trust Fund, and said their plans should be coupled with  tax cuts.

Actually,  released minutes apart in afternoon press releases and just 20 days before the trust fund ends its five-year authorization and 20 months after the state’s now-former transportation commissioner began warning of an impending “crisis” that could doom the roads and bridges New Jerseyans rely on every day a second proposal was released..

Both plans call for increasing the state’s taxes on oil companies, known as the gross petroleum product receipts tax.

Still, it was made clear the proposals would mean higher prices on the roads: The concept offered by Democratic Sen. Paul Sarlo and Republican Sen. Steve Oroho includes an increase in the petroleum taxes that, if passed onto the consumer, would mean a 23-cent increase in the state’s gas tax, to 37.5 cents per gallon.

The two lawmakers, who won support for their proposal from Assembly Majority Leader Lou Greenwald and other members of the lower house from across the state, argued the tax would still be lower than what is paid by motorists in New York and California. Oroho — the only Republican to support either measure — said it is also important to note that an estimated one-third of drivers who buy gas in New Jersey are from other states.

The other proposal, which comes from some senior Assembly Democrats, led by Speaker Vincent Prieto, is much more vague and does not say exactly how much the petroleum tax would need to be increased. It would likely be by a similar margin, given that both plans call for trust funds of the same size. The Assembly version, though, also calls for a “modernization” of how the state taxes jet fuel. Currently, jet fuel is taxed at 4 cents per gallon and only for quantities used during taxiing and takeoff.

Both of the plans announced Friday include similarly ambitious proposals for cutting taxes, notably by phasing out the estate tax, which generates some $600 million in annual revenue and is paid on inherited wealth worth more than $675,000. The Senate version would end the tax in just three years — two years faster than Sarlo and Oroho had previously called for. The Assembly measure would take four years.

Both proposals would boost the tax exemption threshold for retirement income and increase the earned income tax credit from 30 percent to 40 percent of the federal benefit.

The Assembly proposal does not include an income tax deduction for charitable contributions, one idea Republicans have been aggressively pursuing. The Sarlo and Oroho legislation would create a write-off for charitable contributions to specific organizations involved in social services. It would also allow a write-off for those who spend more than 1 percent of their income on the gas tax.

The lawmakers behind both proposals said it was critical that a new trust fund be authorized before the current one runs dry. They also said the status quo is unacceptable. After years of mismanagement, the trust fund is buried in debt and the current gas tax — not raised in more than two decades — can’t support any new construction.

Still, the plans are very similar, differing in just a few ways. There’s really only one notable difference when it comes to actual administration of the trust fund. The Prieto framework calls for doubling transportation aid to municipalities, from about $200 million to about $400 million per year. While Sarlo has previously said he wanted to do that, their plan makes no specific mention of increasing municipal aid.

Most advocates for infrastructure spending reacted positively to the proposals, saying both offer appear to offer realistic approaches to funding transportation projects for the next decade.

New Jersey Environmental Infrastructure Trust

On Monday a New Jersey Assembly panel advanced a bill that would require local governments and authorities wanting to use New Jersey Environmental Infrastructure Trust funds for projects costing $1 million or more to first obtain a financing cost estimate from the trust.

The Assembly Environment and Waste Committee unanimously approved an amended version of A1649, which was introduced Jan. 27 and marks the latest effort to expand the trust’s oversight of local spending.

“The estimate will enable the local government unit to evaluate, and other interested parties to consider, the potential savings of financing and interest costs offered by trust financing compared to other available methods of financing the project,” the bill statement reads.

The amended version exempts local governments from the requirement if an infrastructure project was approved by ordinance or resolution prior to the bill getting signed into law and also reduces the time frame in which the trust must provide the estimate from 15 days to five.

Sponsored by Assemblywoman L. Grace Spencer, who is the committee’s chair, Assemblywoman Eliana Pintor Marin, D-Essex, and Assemblyman Gary S. Schaer, D-Bergen and Passaic, the legislation drew support from the Utility and Transportation Contractors Association of New Jersey and the Laborers International Union of North America.

Ciro Scalera, the government affairs director for the union, thanked the committee for modifying the bill after hearing from its detractors, such as the New Jersey League of Municipalities.

Under the bill, the NJEIT must provide an online form for the financing cost estimate. Local governments may be asked to provide additional information concerning the project and borrower, including a detailed description of the project, design, engineering and environmental information; a cost estimate prepared by the project engineer or other qualified person; information regarding the borrower; and the amount to be financed.

The legislation has been in the works for two years,.

An initial version introduced by the Assembly in July 2014 received 69-7 approval from that chamber in March after review by its Environment and Solid Waste Committee. The Senate introduced a version in September 2014, left that house’s Environment and Energy Committee along with some amendments.

Both bills were referred to, but never advanced from, the Senate Budget and Appropriations Committee.