WASHINGTON — John Horsley and Jack Basso will take nearly 90 years of experience with them when they retire from the American Association of State Highway and Transportation Officials in February, and the two finance and policy gurus say they are disappointed to be stepping away from a very uncertain future for public infrastructure.
Horsley, AASHTO's executive director, and Basso, it's director of program finance and management, both spent decades in government posts before joining AASHTO.
Horsley has been involved in transportation policy and finance for about 40 years, having served five terms as a county commissioner in Kitsap County, Wash. and as an associate deputy secretary at the U.S. Department of Transportation before assuming his current position in 1999. Basso also began his career more than 45 years ago, and his path included stops at the Office of Management and Budget, Federal Highway Administration, and the U.S. DOT where he was chief financial officer before joining AASHTO in 2001.
The two veterans have seen major changes in how transportation finance is tackled at the federal, state, and local levels, and much of that change stems from one reality that has become increasingly clear in the past several years.
State DOTs "used to have a lot more money," said Horsley.
The need to vastly increase the nation's investment in transportation infrastructure was clear many years before the contentious negotiations leading up to the passage earlier this year of the two-year, $105 billion, Moving Ahead for Progress in the 21st Century transportation bill, the pair acknowledged.
But politicians of a generation past had the political courage to raise that money, Horsley said.
The Reagan administration, for example, successfully implemented a five cent per gallon gas tax increase called "The Drew Lewis Nickel," after the secretary of transportation.
"That was the most conservative Republican in human history, who launched this," Horsley said of that 1982 increase.
The issue of increasing the gas tax, which is used to finance transportation projects but has ben stuck at 18.4 cents per gallon since 1993, is considered a political non-starter now. No one want to raises taxes.
With the needs of a growing population demanding more and more transportation infrastructure, but the ability to raise revenues stymied, the pair said, the past two decades have brought dramatic changes in how states do business.
"We don't want to underestimate what you can achieve with the municipal bonds," Horsley said, but added, "We've dramatically increased the tools in the toolbox."
Basso traced the origin of the new wave of "innovative financing" techniques back to the Alameda Corridor Project in California, a $2.4 billion enterprise for which he helped arrange financing while he was at FHWA.
The project, built throughout the 1990's and into the 21st century, involved constructing a 20-mile rail line to consolidate rail traffic between the ports of Los Angeles and Long Beach and the rail yards near downtown Los Angeles. Funding the project were $1.2 billion of revenue bonds, almost $800 million of contributions from the Los Angeles County Metropolitan Transportation Authority and the ports, as well as a $400 million federal loan.
"U.S. DOT hadn't done anything like this before," Basso said. "It got done, the thing got built. That gave rise to a lot of these other ideas."
One of those ideas was the Transportation Infrastructure Finance and Innovation Act of 1998, which Basso called "the big one." TIFIA provides secured loans, standby lines of credit, and loan guarantees to certain transportation projects of major regional or national importance. The last two decades have also seen the rise of many other financing techniques that have made the time since 1995 "the era of innovation," the two said.
These include Garvee bonds backed by federal highway trust fund revenues, public-private partnerships, and even the hugely popular Build America Bond program. "We're able to do more with the dollars available now," Horsley said.
Both men said that they are proud of some of the challenges they have helped to overcome and the progress state DOTs have made in the realm of financing. They are cautiously optimistic, but said there is still a lot of work to be done and that they harbor some regrets about exiting the stage with the future of transportation policy still very unclear.
"I hate to be walking away right now," Horsley said.
The upcoming year will be chock full of important work, with the latest transportation funding law set to expire in 2014 and President Barack Obama set to begin another four years negotiating with a GOP-controlled House.
Both men said they think Obama will have greater flexibility now that he will not have to face reelection ever again.
Both also want to make clear that some sparsely-populated states need the help of a robust federal transportation program, and that the innovative financing techniques now at their disposal will not get them all the way there. "If you're Vermont, or you're Wyoming, you can't get there with smoke and mirrors," Horsley said. "That's the frustration, at least for me."
"States, I think, have been and will step up to the plate and do as much as is feasible within their ability," Basso said. That might not include very expensive or very complex undertakings, for which they will need federal aid, he added.
"The question will be," he noted, "how does that get accomplished?"
AASHTO has not announced successors for Basso or Horsley, although Basso said soon after announcing his own retirement that Horsley's replacement would likely want a voice in selecting his successor.
Basso said he is most proud of helping to make the interests of state DOTs more prominent amongst the swirling maelstrom of the policy process on Capitol Hill. That's a position of strength they will need to keep forging ahead, he said.
"I'd like to think if we accomplished anything, we put state DOTs in position to be a voice," Basso said. "The future is very much on the line."