DALLAS -- The next president and the new Congress elected in November must concentrate on ways to reverse the ongoing decline of the nation's aging surface transportation and civil infrastructure or lose the opportunity to make fundamental policy changes, according to industry experts who are keeping a close eye on the 2016 campaign.
The five-year, $305 billion Fixing America's Surface Transportation (FAST) Act that was signed into law in December 2015 assured state transportation officials of continued federal highway and transit funding for a few years, but provides little extra money for expanding the existing transportation network, they said.
Infrastructure funding is divided and spread thinly, with no national transportation policy to guide investments to accommodate a growing population and an expanding economy, according to the experts.
"The next president will need to create a true and comprehensive vision of America's transportation infrastructure, a program to pursue that vision, and honest mechanisms to fund it," said Beth Osborne, vice president for technical assistance with the advocacy group Transportation For America and former assistant secretary for policy at the Transportation Department.
The current federal surface transportation funding system is a relic from the 1950s that has outlived its usefulness as a way to build new highways, she said in a report released May 12 by the Century Foundation.
Federal transportation funding is spread thin, poorly understood, and often self-defeating, Osborne said.
"The U.S. surface transportation program is hopelessly outdated," she said. "Its 'highways only' focus is not leading to the transportation infrastructure that America needs, and its reliance on a flat gas tax for revenue is not generating enough funding to support the roadway it does build."
Congress transferred $65 billion of general fund revenues to the Highway Trust Fund from 2008 to 2015 to support federal gasoline and diesel tax collections. A transfer of $70 billion was authorized in the FAST Act to supplement $200 billion of fuels tax revenues expected through fiscal 2020.
"There has been bipartisan fear of saying this, but raising the gas tax is the easiest way to fix the funding crisis in the near term," Osborne said. "The U.S. gas tax is low by international standards and can certainly be raised if transportation is the priority that everyone claims it is."
The next president will have to work with Congress to find a permanent, sustainable revenue source for the Highway Trust Fund before funds from the five-year bill run out, said Dave Bauer, senior vice president for government relations at the American Road & Transportation Builders Association.
"Congress did the next president a huge favor in 2015 with the $70 billion patch of the HTF that will expire at the end September 2020, just a few weeks before he or she stands for re-election," Bauer said.
The current $14 billion per year shortfall in gas tax collections will grow to $18 billion per year by then, he said.
"If the next president has any foresight, he or she will get out in front of that situation," Bauer said. "But history has shown that the White House and Congress will wait until the very last penny is drawn from the HTF before they do anything."
The need for increased infrastructure funding is obvious and it's getting worse, the American Society of Civil Engineers said in a May 10 report that highlighted the dire state of U.S. infrastructure. The report cites a number of infrastructure failures that have already occurred, from the drinking water situation in Flint, Mich., to the 2007 collapse of an interstate highway bridge in Minneapolis.
The U.S. will lose out on $4 trillion in gross domestic product and 2.5 million jobs over the next 10 years if a $1.4 trillion funding gap for infrastructure is not resolved, the ASCE said. Infrastructure spending of $3.32 trillion is needed over the decade but funding at all levels of government totals only $1.9 trillion.
If the gap is not filled, ASCE warned, the funding shortfall would reach $5.2 trillion by 2040.
Surface transportation has the greatest disparity between available funding and necessary projects, the report noted.
The transportation investment funding shortfall will total $1.1 trillion through 2025 with an additional $3.2 trillion gap expected from 2026 through 2040 if nothing is done, ASCE said.
"America is currently spending more by failing to act on its infrastructure gap than it would to close it," said Greg DiLoreto, past president of ASCE and chairman of its Committee for America's Infrastructure.
The discussion of infrastructure in the presidential and congressional elections is a hopeful sign that elected officials are willing to deal with the funding problem, said Chris Hamel, managing director and head of municipal finance at RBC Capital Markets.
"Whoever is elected, there's a tremendous opportunity to get something done in 2017," Hamel said. "The question is how do we pay for it?"
Protecting municipal debt from congressional or executive branch efforts to curtail the tax exemption of government-issued bonds is the best way to ensure continued infrastructure spending, Hamel said.
"The municipal tax-exempt debt market continues to finance more than 75% of infrastructure spending in any given year," he said. "Public-private partnerships in the U.S. have not reached the level attained in Europe and Canada because of the dominance of the municipal model."
Expanding the use of tax-exempt debt by P3s could provide an impetus for growth in the sector and help reduce the infrastructure funding gap, Hamel said.
"Other sources of capital are ready and willing to deploy investment dollars in American infrastructure," he said.
A major roadblock to increased infrastructure investments is the lack of a comprehensive national infrastructure policy, said Norm Anderson, president of the consulting firm CG/LA Infrastructure.
"The candidates might talk about infrastructure, but half the time people don't know what it is," he said. "No one is in charge of infrastructure policy in this country, not the president and not the Congress. The truth is there is no transportation infrastructure policy in the U.S. That is unique among developed countries, and not in a good way."
Despite the campaign rhetoric, Anderson said he sees no indication of an agreement in Washington on how to move ahead with transportation funding.
"If infrastructure is not one of the top three priorities of the new president, then nothing will get done," Anderson said. "Without that sort of focus, it's just too complicated to get policies enacted and changes made to how the system operates."
Infrastructure projects should be ranked, with funding going to high-priority efforts that create jobs or eliminate bottlenecks impeding the movement of people and freight, Anderson said.
"By the end of the next administration's first term in 2020, we should have a national infrastructure policy in place that is based on how we can improve our global economic competitiveness," he said. "We need a consensus on how we grow the economy and create opportunities for people."
