Infrastructure Alert - February 29, 2012

Over the past month, there has been a considerable amount of infrastructure action at both the federal and state level. The House and Senate have advanced competing transportation bills and it appears that a decision regarding the future of both bills will be reached in the upcoming days and weeks.   At the federal agencies, the Department of Transpiration has started the fourth round of the TIGER grant program and the Department of the Interior has recently announced the availability of funding for water infrastructure projects. On the state level, the new Tappan Zee Bridge project continues to progress thanks to the help of favorable legislation that allows design-build projects, a scathing audit of the Port Authority of New York & New Jersey criticizes the organization’s leadership and highlights escalating World Trade Center costs, the Governor of Maryland proposed raising the state gas tax to help fund infrastructure projects, and California is launching an innovative program to invest pension funds in global infrastructure assets. 

 On the Hill

On February 3rd, the House Transportation and Infrastructure Committee approved the American Energy and Infrastructure Jobs Act. The bill would authorize new domestic drilling for oil and gas to pay for highways, rails and bridges. 

The bill includes an amendment that prevents any of the money from being used on California’s proposed high-speed rail system. California is currently in plans to build a high-speed rail system that would extend from Anaheim to San Francisco at a cost of about $98 billion. 

Additionally, the bill would divert almost $25 billion in fuel tax revenue from the Mass Transit Account in order to help fund highways. The Mass Transit Account would be removed from the Highway Trust Fund and replaced with a one-time appropriation of $40 billion. If passed, the bill would mark the first time in over 30 years that there would be no guaranteed funding for public transit. 

While the House was able to pass the energy and new drilling portion of the legislation before the President’s Day recess, lawmakers must now deal with many issues relating to the larger bill, such as finding a new offset for funding. The previous offset (what was it) has been taken off the table through the payroll tax extension.  Right before the break, House leadership delayed a vote on the final $260 billion complete reauthorization bill due to dissention within the Republican Party. Speaker Boehner says he will now consider scaling back the five year reauthorization legislation and will most likely take out the proposal to remove transit funding from the highway trust fund.

Meanwhile, the Senate is in the process of advancing its own transportation bill - the Moving Ahead for Progress in the 21st Century bill (S. 1813). On February 9, the Senate voted 85-11 to allow the bill to proceed to debate. Supported by the Obama Administration, the bill ties together pieces of work from the Senate Environment and Public Works Committee, the Senate Finance Committee, Senate Commerce and the Senate Banking, Housing and Urban Affairs Committee. 

The bipartisan legislation was expected to move more easily though the entire chamber than the House bill, but last week a Senate procedural vote to move forward with voting on the entire bill failed. Numerous amendments from Republicans - including those on unrelated topics such as aid to Egypt and contraception - have tied up the bill over the past few weeks. However, bipartisan compromise on pretax benefits and grants for freight infrastructure programs has Senate leaders in both parties optimistic about the passing of the entire bill once all the amendments have been considered.

The Senate bill is financed by $9.6 billion in offsets from closing tax loopholes as well as $36 billion per year from the federal gas tax, the traditional funding source for transportation bills.  This differs greatly from the House bill’s method of financing, which involves tying spending to revenue the federal government would gain from expanded domestic oil-and-gas drilling.

In other Congressional infrastructure news, The Senate Finance Committee accepted an amendment to the Internal Revenue Service code to lift the volume cap (the amount of tax-exempt financing available for certain projects) on private activity bonds for water and wastewater projects and permit Indian tribes to issue tax-exempt private activity bonds for water infrastructure. This move is projected to open up $2-5 billion annually in private capital for water infrastructure projects, often in the form of public-private partnerships.

On February 15, President Barack Obama signed the FAA Modernization and Reform Act of 2012 (H.R. 658). The law provides $63.4 billion in FAA funding over four years, including about $11 billion toward modernization the nation’s air traffic control system.  The legislation is a long-term funding bill which will provide the FAA with the necessary funding to ensure stability, improve aviation safety, and upgrade critical infrastructure.  The newly passed bill is the first long-term FAA reauthorization measure since 2007.   

On February 13, President Obama released his Budget for Fiscal Year 2013 this week which proposes spending $476 billion on highway, bridge and mass transit projects through 2018. The transportation spending is funded in part by ending the wars in Iraq and Afghanistan.  The President’s six-year transportation proposal would also expand inter-city passenger rail and add new funding for road and bridge repair.  Additionally, it would create a National Infrastructure Bank which would offer broad eligibility and unbiased selection for large-scale ($100 million minimum) transportation, water, and energy infrastructure projects.

Republican Senators announced their intent to introduce competing legislation to Senator Joe Lieberman’s (I-CT.) Cybersecurity Act of 2012. The bill would increase government oversight of some private networks like electric grids, water systems, or transportation, which could be at risk of cyber-attacks. The Department of Homeland Security would be responsible for determining which businesses should be considered critical infrastructure. 

At the Agencies

U.S. Department of Transportation Secretary Ray LaHood announced the availability of funding for transportation projects in the fourth round of the TIGER (Transportation Investment Generating Economic Recovery) Discretionary Grant program.  TIGER grants are awarded to transportation projects that have a significant national or regional impact.

Secretary LaHood also recommended $2.2 billion in funding to begin or advance construction of 29 significant rail and bus rapid transit projects in 15 states. The Administration claims that the projects, included in President Obama’s proposed Fiscal Year 2013 budget, will put thousands of Americans to work building the vital infrastructure the nation needs to improve access to jobs while reducing U.S. dependence on oil and spurring new economic development.

Department of the Interior Secretary Ken Salazar announced $50 million for Western water infrastructure projects, $30 million of which will be directed to rural areas. The money will help maintain aging systems, restore aquatic habitat and meet increasing water demands of the region. Six rural water projects selected by the Bureau of Reclamation will receive funding under the agency's 2012 appropriation.

The U.S. Department of Transportation has announced a $3.5 million grant to a four-university consortium for research and education on sustainable transportation topics. The consortium, led by Portland State University, also includes the University of Oregon, the Oregon Institute of Technology, and the University of Utah. This new, two-year grant builds on prior work done by OTREC (the Oregon Transportation Research and Education Consortium).

In the States

California: The California State Teachers’ Retirement System (“Calstrs”) is investing $500 million in infrastructure assets across the globe. Calstrs has partnered with Industry Funds Management Pty. Ltd., an Australia-based firm that specializes in infrastructure investments.  Budget strain at both the federal and state level has led to opportunities for privatization of infrastructure assets.

New Jersey/New York:  On February 7, the first phase of an audit of the Port Authority of New York & New Jersey was released. The audit found that the bi-state agency needs a “top-to-bottom overhaul” due to “a lack of consistent leadership, a siloed underlying bureaucracy, poorly coordinated capital planning process [and] insufficient cost controls.” The Port Authority, which at its core is a transportation infrastructure organization, had seen World Trade Center project costs balloon from an estimated $11 billion in 2008 to $14.8 billion.  

New York: On February 9, the New York State Thruway Authority and the New York State Department of Transportation released the list of qualified competitive bidders for the new Tappan Zee Hudson River Crossing Project.  The four qualified consortiums are the Hudson River Bridge Constructors, Kiewit-Skanska-Weeks Joint Venture, Tappan Zee Bridge Partners (a Bechtel/Tutor Perini Joint Venture), and Tappan Zee Constructors. These qualified groups will have the opportunity to bid on both the design and construction contract for the new bridge. The Infrastructure Investment Act, passed by the New York State legislature in late 2011, allows certain state agencies to use design-build for capital projects relating to physical infrastructure projects. 

Maryland: Maryland Governor Martin O’Malley has introduced a six percent increase in the state gas tax as a way to raise money for the state’s transportation infrastructure needs.  The proposed legislation would be phased in over the span of three years and could potentially generate over $600 million for the state.   However, so far the plan has received a “chilly” reception with state lawmakers.

Events This Week

On February 28 at 10:00am, the House Transportation and Infrastructure Committee will hold a series of hearings titled "Review of Innovative Financing Approaches for Community Water Infrastructure Projects."

On February 28th at 10:15am the House Energy and Commerce Committee will hold a hearing titled "Critical Infrastructure Cybersecurity: Assessments of Smart Grid Security."

On February 26th through 29th the American Association of State Highway and Transportation Officials will hold a Transportation Policy Conference at the Washington, D.C. Hyatt Regency Hotel.

On February 28th at 10:00am the Senate Environment and Public Works Committee will hold a hearing on the wastewater and drinking water infrastructure needs of local municipalities, rural communities and other similar jurisdictions, focusing on approaches to expand the ability of these communities to maintain and improve their water systems.

On March 1st at 10:00am the Transportation, Housing and Urban Development, and Related Agencies Subcommittee of the Senate Appropriations Committee will hold hearings on proposed fiscal 2013 appropriations for departments, agencies and programs under its jurisdiction.

On March 8th at 9:00am the Americas Society will hold a panel discussion titled "Transportation and Communication Infrastructure in Latin America: Lessons from Asia."

On March 8th at 9:30am the House Appropriations Committee's Transportation, Housing and Urban Development, and Related Agencies Subcommittee will hold a hearing on proposed fiscal 2013 appropriations for the Department of Transportation, Secretary Ray LaHood will testify.