Congress Reaches Agreement on Long-Term Highway Bill
At long last, the U.S. Congress has arrived at an agreement to fund our nation’s transportation systems for a full five years. The FAST Act, short for “Fixing America’s Surface Transportation,” provides around $300 billion in funding for highways, passenger rail, transit and safety.
The final deal was negotiated by a bipartisan group of Representatives and Senators which included Representative Bill Shuster, (R-PA), who leads the House Transportation and Infrastructure Committee; Representative Peter A. DeFazio (D-OR), the House committee’s senior Democrat; Senator James M. Inhofe (R-OK), who leads the Senate Environment and Public Works Committee; and Senator Barbara Boxer (D-CA), the Senate committee’s senior Democrat.
Rather than raising the gas tax, which has been stagnant since 1993, the legislation draws upon a mix of short-term financing mechanisms. One of the mechanisms is the sale of 66 million barrels of oil from the Strategic Petroleum Reserve, which is projected to yield $6.2 billion over 10 years. This estimate assumes a doubling in the price of oil over that time frame. Other mechanisms include more aggressive recuperation of back taxes owed, which is expected to yield $2.4 billion, and $5.2 billion from customs fees.
The most controversial funding mechanisms are those related to the Federal Reserve. The FAST Act takes $19 billion from the Fed’s rainy day fund. It also cuts the Fed’s annual dividend payment to large commercial banks by tying it to the interest rate on 10-year Treasury bonds. This represents approximately a 5% reduction.
The 1,300 page measure includes numerous components. Several highlights stand out as important to the business community. First, the FAST Act reopens the Export-Import Bank, which the Arizona Chamber has long supported due to the role it plays in keeping American manufacturing competitive in the global marketplace. In 2014 alone the Export-Import bank supported an estimated 164,000 jobs and $27.4 billion in exports.
Overall, the bill increases highway spending by 15% and transit spending by 18% over its five year duration. Every state is set to receive a 5% increase in highway funding the first year and an 8% increase for local transit systems. Other provisions of interest include: A refocusing of funding on the National Highway Freight Program, expansion of funding for bridges, increased flexibility for states and cities with respect to the Surface Transportation Program, and streamlining of environmental reviews and other permitting processes.
Safety measures also receive attention in the FAST Act. Some notable provisions are stiffer penalties for car manufacturers that withhold safety information, better technology to prevent passenger rail derailments and collisions, prohibition on rental car agencies and new car dealers from renting cars that have been recalled but not repaired, increased funding for highway/railway grade crossings, and incentives for the adoption of innovative truck and bus safety technologies.
Although we would have preferred a more straight forward funding approach, we are nonetheless heartened that our state and local transportation agencies will finally have the certainty they need to move forward on much-needed projects. We are highly optimistic that the FAST Act will make its way to the President’s desk within the next week or so. This will make for a great start to 2016 when the Arizona Department of Transportation and our friends in the construction industry can get to work improving and expanding our roads and highways.