New Study Focuses on Solutions for Nation’s Highways

Thomas Mullen
May 13, 2015

Americans agree that our crumbling infrastructure needs fixing. Getting them to agree on what to fix and how to pay for it? That’s a little tougher. But a paper published Monday by the Hamilton Project puts forth some ideas it said would kickstart this much-needed initiative.

Financing U.S. Transportation Infrastructure in the 21st Century proposes seven strategies for breaking the funding and strategy logjam that has left critical infrastructure reinvestment in the lurch. The paper was the subject of a Brookings Institute public forum kicking off Infrastructure Week, a series of events focused on fixing and funding America’s roads, bridges and other critical arteries. If your afternoon is free, you can read the full paper here. But since we at SmartComment love to simplify the dialogue between planners and the public, we put together our own down-and-dirty breakdown of each of the proposals below. Enjoy!

Sorry, but when I read about the Transportation Infrastructure Finance and Innovation Act (TIFIA), all I hear is the song in those Jamie Lee Curtis yogurt commercials. Unlike yogurt, TIFIA doesn’t taste too great. But it does contribute to the skeletal strength of our country by loaning money to revenue-producing transportation projects (such as toll roads). The Hamilton Project paper advocates three main reforms to the law.

Increase TIFIA Funding
The first reform reads like a pretty splashy one: expanding federal lending through TIFIA from $1 billion per year to $10 billion – an investment that the Hamilton Project paper claims would unlock financing for nearly $400 billion in infrastructure projects. Now bear in mind that TIFIA funds are dedicated to new construction and couldn’t be used for infrastructure. But the paper says the proposed increase in TIFIA funding would relieve the demand that new construction projects put on other federal grants, which could then be freed up for infrastructure projects. The paper also claims that increased TIFIA funding would attract a new host of bigger applicants, including mega-projects that might not have considered TIFIA funding before.

Expand TIFIA Projects Outside Surface Transportation
The second TIFIA reform involves expanding the list of projects eligible under TIFIA. Currently, TIFIA only funds surface transportation projects since it’s historically been funded by the Highway Trust Fund (HTF). But the Hamilton Project paper says TIFIA projects should be expanded to ports, aviation, and even to economic development projects that maximize the value of infrastructure assets. The paper says the expansion is justified since the Highway Trust Fund has begun to rely on general revenue transfers, which opens the door to expand TIFIA funding beyond the surface projects that it’s traditionally served.

Fix TIFIA’s Credit Score
Simply put, TIFIA could stand to write down the phone number of one of those credit score commercials. According to the Hamilton Project, the federal government hasn’t lost any funds in TIFIA’s 16-year history and the average subsidy rating of its projects over the past few years has been substantially less than earlier estimates had expected. The Hamilton Project paper proposes that the U.S. Department of Transportation and the Office of Management and Budget use executive action to align TIFIA’s future credit scores with its past track record, which it says would greatly expand the program’s ability to fund projects.

Bring Back BABS
We’re not talking about a Barbra Streisand farewell tour here. The Hamilton Project paper is referring to Build America Bonds, an economical form of debt offered by the federal government for state and local projects in 2009 and 2010. BABs were used to fund $181 billion in projects in those two years before being allowed to unceremoniously expire. Basically, a BAB is a lower-rate credit card than the one (traditional municipal debt) that state and local governments generally use to pay for infrastructure improvements.

Send in the Army!
The Hamilton Project paper proposes using the Army Corps of Engineers to improve critical port-improvement projects, with additional funding provided by the under-used Harbor Maintenance Trust Fund (HMTF) which had a surplus of $8.5 billion at the end of FY2014.

Reform the Gas Tax
The federal gas tax that has traditionally funded the Highway Trust Fund (HTF) has fallen on hard times. With the gas tax in decline since 1993, the HTF has had to borrow more than $50 billion in general revenue since 2008 to remain solvent, according to the paper. To avoid further general revenue transfers or shuttering the HTF program, the Hamilton Project paper proposes making the gas tax vary inversely with the price of gas to stabilize it, and also setting minimum and maximum levels that would get the HTF through bouts of gas trouble.

Update Those Toll Booths
Okay, it’s not that simple. But, yes, the Hamilton Project wants to modernize and standardize how states and cities collect user fees (tolls) from their revenue-producing infrastructure projects. You know that fancy new placard that lets you bypass the toll booth? The Hamilton Project paper says technology like that should be standardized across the nation. Not an overnight fix obviously, but not too big a deal, right? Heck, even my burger joint has switched to an Ipad with a credit card swiper. However, the paper makes the considerably bolder move to propose collecting “beneficiary fees” from those who benefit from infrastructure improvement — even if they aren’t users. Basically, those homeowners who saw their housing values jump when that new toll road entrance went in nearby? They’d be getting hit up. So too that business getting all those new customers from the turnpike off-ramp. According to the Hamilton Paper proposal, the federal government should establish and standardize a collection policy for these new fees and then subsidize the projects they fund. The paper also pushed the federal government to create new and more efficient funding structures to account for how technology will negatively affect the current funding mechanisms. For example, electric cars don’t pay gas taxes even though they use the highways just like other cars. And that’s not, like, fair at all.

Buy in Bulk
Remember when your parents put you on their Costco account when you went away to college? Those were good years. Know why? Because you were maximizing your combined family buying power! Living the dream! Buying in bulk! The Hamilton Project paper says many of our states and cities could stand to do more of this when stocking up on the goods that go into their infrastructure projects. Right now, they’re basically a loose family of CVS shoppers. The Hamilton Project wants to change that by proposing a pool procurement program where the federal government would establish an electronic system open to all infrastructure operators. They could then search for and post information regarding their needs, find a buying partner, and negotiate a better price for all. Localities that demonstrate cost savings through the system could then be eligible for additional funding grants – basically good shopper discounts.

Get a National Infrastructure Strategy
In the end, The Hamilton Project says it’s time for one big “Eight is Enough” family huddle to figure out how we’re going to fix all these broken bridges, roads and seaports. It proposes a national commission made up of federal, state and local infrastructure operators and private companies. The commission would figure out where there is convergence amongst the different infrastructure plans currently in place, analyze and identify national goals and priorities, then determine which modes of infrastructure are most cost-effective in certain corridors and regions. The Hamilton Project paper insists that an overhaul is timely, given today’s historically low public borrowing rates and the need for a boost smack in the middle of the labor market.

There’s obviously a lot to digest and discuss here, but the Hamilton Project is adamant that its measures are doable, necessary and offer no adverse effect on the federal deficit. “If adopted, these proposals would put our nation back on track to build and maintain infrastructure that is critically needed to advance economic growth and prosperity through the twenty-first century,” the paper says.