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The American Society of Civil Engineers
Financing 21st Century Infrastructure
United States Senate
Committee on Finance
May 17, 2011
The American Society of Civil Engineers (ASCE)1 would like to thank the Finance Committee for holding a hearing on how to improve financing for job creating infrastructure investments. The Society is pleased to present to the Committee our views on investing in the nation’s transportation infrastructure.
ASCE is concerned with the increasing deterioration of America’s infrastructure, reduced investment for the preservation and enhancement of our quality of life, and with the threatened decline of U.S. competitiveness in the global marketplace. In response, ASCE has issued multiple Report Cards on the condition of the nation’s infrastructure that have helped inform the national discussion. More recently, ASCE has sought to advance solutions to the problems highlighted in the Report Card that provide for an improved quality of life, as well as stimulate the economy. Passing a transformative, multi-year surface transportation bill, with significantly increased funding levels will go a long way to creating a surface transportation system worthy of the Twenty-First Century.
It is important to note that, as Congress begins the process of developing a comprehensive multi-year surface transportation authorization, and as President Obama discusses the administration’s proposal to invest $556 billion on the nation’s transportation infrastructure, our roads, bridges, and transit systems continue to suffer from underinvestment.
Infrastructure Receives a Grade of “D”
ASCE’s 2009 Report Card for America’s Infrastructure graded the nation’s infrastructure a “D” based on 15 categories (the same overall grade as ASCE’s 2005 Report Card), and estimated that the nation needs to invest approximately $2.2 trillion from 2009 – 2014 to maintain infrastructure in a state of good repair. This number, adjusted for a 3 percent rate of inflation, represents capital spending at all levels of government and includes what is already being spent. Even with the current and planned investments from federal, state and local governments from 2009 - 2014, the “gap” between the actual spending and overall need will exceed $1 trillion by the end of the five year period.
In the 2009 Report Card, the nation’s roads received a grade of “D-”, bridges a grade of “C”, and transit a grade of “D”. With nearly one-third of roads in poor or mediocre condition, a quarter of the nation’s bridges either structurally deficient or functionally obsolete, and use of our long neglected transit system increasing to its highest levels in 50 years, it is not hard to see why the nation’s surface transportation system is in a state of decline. To bring just these three surface transportation categories up to an acceptable condition would require a five year investment of $1.2 trillion from all levels of government, according to ASCE estimates. The results of years of under investment can be seen in unsafe bridges and dams, deteriorating roads and transit systems, and increased congestion. If the nation continues to under invest in infrastructure and ignores this backlog until systems fail, we will incur even greater costs.
5 Key Solutions
In 2010, ASCE brought together engineers and infrastructure policy experts to further focus on the 5 Key Solutions that were identified in the 2009 Report Card for America’s Infrastructure. These solutions include:
Increase federal leadership in infrastructure;
Promote sustainability and resilience;
Develop federal, regional, and state infrastructure plans;
Addressing life cycle costs and ongoing maintenance; and
Increase and improve infrastructure investment from all stakeholders.
During infrastructure roundtables in both Washington, DC and throughout the country, several themes were identified as common problems or needs including the need for a clear national infrastructure vision, a better informed public, and the need for performance-based data that can target investments which reward good performance. By addressing these issues intelligently with smart infrastructure investments, we can develop a safer and more economically competitive nation.
Benefits of Multi-Year Surface Transportation Legislation
Money invested in essential public works can create jobs, provide for economic growth, and ensure public safety through a modern, well-engineered transportation system. By improving the nation’s deteriorating surface transportation system both economic and job creation opportunities will be provided, while creating a multi-modal transportation system for the Twenty-First Century. The nation’s transportation infrastructure system has an annual output of $120 billion in construction work and contributes $244 billion in total economic activity to the nation’s gross domestic product. In addition to the significant economic benefits for the entire nation, the Federal Highway Administration estimates that every $1 billion invested in the nation’s highways supports 27,823 jobs, including 9,537 on-site construction jobs, 4,324 jobs in supplier industries, and 13,962 jobs throughout the rest of the economy.
Expanding Infrastructure Investment
Despite significant funding levels in TEA-21 and SAFETEA-LU, the nation’s surface transportation system requires increased investment to meet the documented needs.
For this reason, ASCE supports a variety of revenue streams for infrastructure investments, including an increase in the motor fuels tax, indexing the motor fuels tax to the Consumer Price Index, and eventually transitioning to a vehicle miles traveled system. ASCE supports a reliable, sustained user fee approach to building and maintaining the nation’s highway and transit systems. Establishing a sound financial foundation for future surface transportation expansion and preservation is an essential part of any authorization.
Since the motor fuels tax was last increased in 1993, the purchasing power has been reduced by nearly 55 percent, between 1998 and 2015, according to the American Association of State Highway and Transportation Officials. Raising the motor fuels tax to meet the documented system needs will ensure the near term viability of the Highway Trust Fund. Additionally, the National Commission on Fiscal Responsibility concluded that an increase in the motor fuels tax of 15 cents would reduce the deficit, because the Highway Trust Fund would not need another infusion of revenue from the General Fund.
In the long term, with the affects of increased fuel efficiency and alternate fuel technologies, other methods must be explored outside of an increased motor fuels tax in order to sustain a viable Highway Trust Fund in the long term. A mileage-based system for funding surface transportation programs needs to be further studied, and the recommendation of the National Surface Transportation Infrastructure Financing Commission, calling for a transition to a vehicle miles traveled (VMT) fee system, must be fully explored. A large scale demonstration project, to follow up on the work done in Oregon, should be undertaken to determine the practicality of such a program.
ASCE supports innovative financing programs, such as the use of Public-Private Partnerships, Build America Bonds, the expansion of TIFIA, increased flexibility of GARVEE bond repayment methods, the establishment of a federal capital budget, and the creation of a national infrastructure bank, for transportation projects. Furthermore, the federal government should make every effort to develop new programs and additional flexibility in innovative financing approaches. Innovative financing techniques can greatly accelerate infrastructure development and can have a powerful economic stimulus effect compared to conventional methods. This has been the approach in many states where expanded and accelerated transportation investment programs have been successful.
Strained state and local government budgets, combined with increasing demand, have led to the implementation of public-private partnerships (PPPs) in several states and localities. The injection of private capital into public works, however, has drawn some criticism from stakeholder groups and raised the need for a set of guiding principles for these projects as they are planned, implemented, and maintained. While PPPs are a method of project financing, they do not replace direct public funding of infrastructure projects and they should only be used when the public interest is protected.
The creation of a National Infrastructure Bank could play a significant role in improving the nation’s infrastructure by leveraging public funds with private dollars. ASCE supports The Building and Upgrading Infrastructure for Long-Term Development or BUILD Act, S. 652, that was introduced by Finance committee member, Senator John Kerry (D-MA). Due to the fact that the BUILD Act would be capitalized initially by general fund appropriations, but self sustaining after the start up period, the financing mechanism would provide long term benefits and another financing tool for projects of regional or national significance. ASCE hopes to see legislation related to the creation of an infrastructure bank move forward in the current Congress.
Finally, ASCE supports the establishment of a federal multi-year capital budget, separated from non-capital federal expenditures, for public works infrastructure construction and major rehabilitation, similar to those used by state and local governments. The current federal budget process does not differentiate between expenditures for current consumption and long-term investment, even though infrastructure, by its very nature, is a long term investment. This current system causes major inefficiencies in the planning, design, and construction process for long term projects. A federal capital budget could create a mechanism to help reduce the constant conflict between short term and long term needs, while providing the financial assurance that federal, state, and local governments require in order to move forward with infrastructure investments. Lastly, a federal capital budget also would help increase public awareness of the problems and needs facing the nation’s physical infrastructure and help Congress focus on programs devoted to long term growth and productivity.
The innovative programs in SAFETEA-LU have been a good start, but more needs to be done to expand their scope, and new programs or approaches must be introduced. We must find new and innovative ways to finance the critical transportation infrastructure needs of the nation, because relying solely on the traditional sources of funding no longer works. However, financing alternatives cannot replace a public commitment to funding. Financing by any technique does not supplant the need for adequate user fees or other funding sources to eventually pay for projects.
Surface transportation infrastructure is a critical engine of the nation’s economy. It is the thread which knits the nation together. To compete in the global economy, improve our quality of life and raise our standard of living, we must successfully rebuild America’s public infrastructure. Faced with that task, the nation must begin with a significantly improved and expanded surface transportation system, which can only be accomplished through solving the funding and financing question.
ASCE looks forward to working with the Congress as it develops robust surface transportation authorization legislation which is founded on a strong national vision, adequate funding and new technology, and creates an integrated, multi-modal national transportation system.