Senate Committee Members Question Obama Proposal

The chairman of the Senate Finance Committee yesterday made clear he opposes a national infrastructure bank to fund transportation needs, warning it would siphon money away from projects the highway trust fund currently finances and serve urban areas at the expense of rural parts of the country.

"I think it would rob the future of our highway program," Sen. Max Baucus, D-Mont., said at a Senate Committee on Environment and Public Works hearing on transportation financing. Baucus also said that there are plenty of "mechanisms" to finance transportation needs, but "we don't have the money."

But Secretary of Transportation Ray LaHood, testifying before the committee, said that a national infrastructure bank, which is included in President Obama's fiscal 2010 budget proposal, has to be on the table as an option.

"The president's budget proposes to expand and enhance existing federal infrastructure investments through a national infrastructure bank designed to deliver financial resources to priority infrastructure projects, including highways and transit systems, of significant national or regional economic benefit," LaHood said.

"It's something we're thinking about," he said. "You can raise a pretty good chunk of money" through a national infrastructure bank.

Other committee members and panelists, including Pennsylvania Gov. Ed Rendell, agreed that all options to finance transportation needs must be considered as lawmakers and the Obama administration work on a bill to replace the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, or SAFETEA-LU, which expires Sept. 30.

The new bill will be called Moving Ahead for Progress in the 21st Century, or MAP-21, committee chairman Barbara Boxer, D-Calif., said, adding that the she expects LaHood and the administration to be a "full partner" in crafting it.

Most of the transportation programs under the current law are capitalized through gasoline and diesel fuel taxes, which have been falling as people drive less and use more fuel-efficient cars.

The highway trust fund, which was depleted last fall and had to be infused with an $8 billion transfer of general funds, is expected to support investments of $20.5 billion in fiscal 2010, according to the Congressional Budget Office. But that the amount would have to be cut in half if new revenues are not dedicated to the fund, the CBO concluded.

LaHood said after the hearing that the Department of Transportation is "keeping an eye on" the trust fund's balance.

While gasoline and diesel tax revenues have fallen off, Boxer told LaHood that the highway trust must remain a part of the discussion.

"President Obama has said that the highway trust fund doesn't work ... We don't accept that," Boxer said.

She said that while she is "averse" to raising the gas tax, one possibility would be to tie increases to the gas tax, which has not been raised since 1993, to inflation in future years.

LaHood reiterated that the administration will not seek to raise the gas tax in the current economic climate.

Rendell, who has been an advocate of infrastructure financing alternatives to the highway trust fund, said that hesitant lawmakers should keep an "open mind" about a national infrastructure bank. The bank could be financed with a "limited" capital budget that would focus on projects of major significance connecting regions and cities, because states are not able to finance them on their own, he said. Lawmakers could still use formula-based and pay-as-you-go financing for other programs, he added.

"[States] can't do major projects any more ... Construction costs have gone up ... and the federal money you give us now can only go to maintenance" of the existing infrastructure, Rendell said.

"An infrastructure bank can help leverage private funds and reduce up-front costs to the federal budget," he said. "The key to making this concept work is to replicate what is in place in many cities and states - a capital budget - where the costs of a valuable asset are accounted for over its useful life of 20 or 30 years instead of all up front."

In addition, Rendell told the committee that states should be able to toll interstate highways and use private dollars in public-private partnerships, such as leasing toll roads.

"Congestion pricing and increased flexibility with respect to tolling on federal interstates are necessary since user charges are needed to attract private capital to certain aspects of infrastructure financing," he said.

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