Copyright © 2008 Holland & Knight LLP All Rights Reserved TFLEX April 2008 Workshop: Federal Funding Issues April 8, 2008 Jeffrey F. Boothe 2099 Pennsylvania

Copyright © 2008 Holland & Knight LLP All Rights Reserved

TFLEX April 2008 Workshop:Federal Funding Issues

April 8, 2008

TFLEX April 2008 Workshop:Federal Funding Issues

April 8, 2008

Jeffrey F. Boothe

2099 Pennsylvania Avenue, NW

Suite 100

Washington, DC 20006

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OverviewOverview

• A look back at SAFETEA-LU – Lessons Learned

• Review of National Surface Transportation Policy and Revenue Commission

• Key Issues for Surface Transportation Authorization

• Climate Change – Immediate Opportunity

•What does the next Surface Transportation bill have in store for transit?

•Discussion regarding specific transit programs

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SAFETEA-LU in RetrospectSAFETEA-LU in Retrospect

• Bridge to Nowhere

– Media defined SAFETEA-LU in terms of earmarks

– No story regarding nation’s infrastructure deficit

• Congress sought a traditional bill

– More money + more projects=jobs

– Instead, modest funding growth exceeded by growth in inflation in construction costs

• I-35W Bridge Collapse

– Initial stories of concern but lack of sustained public interest

– Failed attempt at securing gasoline tax increase for bridges

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National Surface Transportation Policy and Revenue Study CommissionNational Surface Transportation Policy and Revenue Study Commission

• Propose a compact with American people

– Establish performance-based approach for investments using a benefit-cost analysis

– Eliminate 108 programs and reduce down to 10 programs

– Further project delivery streamlining

– 25-40 cent a gallon increase in gasoline tax phased over five years

• Impact on transit

– Program folded into highway program

– Maintenance would be included in Asset Management Program

– System expansion would be funded through Congestion Relief program

– More funding and decisions made at regional level

• Much depends upon the performance-based measurements and benefit-cost analysis

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Schedule for Surface Transportation AuthorizationSchedule for Surface Transportation Authorization

•Will it pass by September 30, 2009 – Not Likely

– House is holding hearings and would like to get bill done by September 30, 2009

– Senate hasn’t committed to this schedule

– New Administration and vexing nature of funding make passage by October 1, 2009 improbable

•Highway Trust Fund is in Serious Trouble

– Highway Trust Fund faces substantial deficit in FY 2010

– Mass Transit Account reaches deficit in FY 2011

• Crisis Creates Challenges and Opportunities

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Status of Highway Trust FundStatus of Highway Trust Fund

• Funding

– HTF will experience a cash shortfall of $3.2 billion in FY 2009 based on SAFETEA-LU authorized levels while MTA will have cash balance of $4.4 billion

• DOT is proposing to advance $3.2 billion from MTA to HTF to cover shortfall

• Effect will be to have both accounts in negative balances in FY 2010

• Current Administration opposes gasoline tax increase and favors public-private partnerships

– Gas tax is not sustainable with CAFÉ standards increasing to 35 mph and increasing use of alternate fuel vehicles

– Second Commission is examining funding options

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Federal Gasoline TaxFederal Gasoline Tax

Transportation: Invest in Our Future, AASHTO, April 2007

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Sources of HTF RevenuesSources of HTF Revenues


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Inaction NOT an Option for HTFInaction NOT an Option for HTF


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Modest Increase in Gasoline TaxModest Increase in Gasoline Tax


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More Aggressive Gas Tax IncreaseMore Aggressive Gas Tax Increase


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Debt Financing Growing RapidlyDebt Financing Growing Rapidly

Tax and Budget Bulletin, No. 37, CATO Institute (April 2006)

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Construction Costs Impact Buying PowerConstruction Costs Impact Buying Power


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Next Surface Transportation AuthorizationNext Surface Transportation Authorization

• Redefining the “Federal Interest”

– Green-TEA? – Climate Change and Reducing Dependency on Foreign Oil

– Metro Economies? – More than 60 percent of people, jobs and goods generated in nation’s largest metro areas

– Goods movement? – Freight mobility and resuscitate “short seas shipping”

– Reauthorize Gallatin Commission? – need to invest in deteriorating infrastructure

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• Substitution by other energy sources unlikely.

• New car fleet that makes a dent takes time (and money).

• Only viable solution that can work now:

– The solution: TRAVEL LESS

Less long distance commuting

Grow foods at home

Make goods locally

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How To Use Less OilHow To Use Less Oil

• Liberate the workforce/pay by productivity:– Let people adopt flexible work rules: where and when

– The most productive earn the most

How To “Travel Less”How To “Travel Less”

• Ship people and goods as efficiently as possible:

– Trains trump trucks (when they work)

– Water beats trains hands down

• Grow food locally:

– “Food miles” represent energy waste

– Local food also tastes like food

• End “globalized” manufacturing plants.

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Energy Security - Imports by CountryEnergy Security - Imports by Country

Annual Energy Outlook 2007, Energy Information Administration

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Energy Security - Imports from OPEC CountriesEnergy Security - Imports from OPEC Countries


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Energy Security - Consumption of OilEnergy Security - Consumption of Oil


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Did You Know?Did You Know?

• Transit already reduces U.S. travel by 102.2 billion vehicle miles traveled each year

– Equal to 3.4 percent of annual VMT

• Transit reduces consumption of 1.4 billion barrels of oil per year

• Transit reduces energy consumption by 4.2 billion gallons of gasoline per year

• The Broader Connection between Public Transportation, Energy Conservation and Greenhouse Gas Reduction, Linda Bailey, Patricia Mokhtarian and Andrew Little, ICF International, February 2008

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Surface Transportation – Importance of Land Use Surface Transportation – Importance of Land Use

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VMT Growth and US PopulationVMT Growth and US Population

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Land Use and CO² EmissionsLand Use and CO² Emissions

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Land Use and CO² EmissionsLand Use and CO² Emissions

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Where Will Next 100 Million People Live?Where Will Next 100 Million People Live?

• Last 100 million added in 39 years

• Next 100 million will be added in less than 35 years

• Where will they live and work?

• Hidden in Plain Sight (2004) projects increase in housing from 6.4 M units near transit now and an additional 14.6 units are needed by 2025

• 70 M units must be built by 2040

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The Effect of Aging Baby Boomers on the U.S. PopulationThe Effect of Aging Baby Boomers on the U.S. Population

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Demographics of Nation ChangingDemographics of Nation Changing

•Married Couples represent 51.7% in 2000 down from 55.1% in 1990 and are expected to be less than 50% by 2010

• Increasingly diverse as minority population will grow from 29.4% in 2000 to 38% in 2025

• Population increasingly shifting to metro areas

– Minority population growth in first-ring suburbs

– Downtowns are witnessing significant growth in housing demand

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Nation’s Economy Dependent on Metro AreasNation’s Economy Dependent on Metro Areas

Metro Economies Report, United States Conference of Mayors (January 2007)

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GMP of top 10 Metro Areas Exceeds GMP of 34 States and DCGMP of top 10 Metro Areas Exceeds GMP of 34 States and DC

Metro Economies Report, United States Conference of Mayors (January 2007)

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Population and Transit RidershipPopulation and Transit Ridership

• 84% of all people live in areas above 50,000 in population

• 10.1 million trips – first time over 10 million trips since 1946

– 30 percent growth since 1995

– 12 percent population growth since 1995

– 24 percent VMT growth since 1995

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Must Have Access to TransitMust Have Access to Transit

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Climate Change LegislationClimate Change Legislation

• Lieberman-Warner Bill – S. 2191

– Establishes economy wide cap-and-trade system for reducing GHG emissions

• Focus is predominately on utility sector with insufficient focus on surface transportation

– Creates estimated $4 trillion in allowances over 40 years that are allocated to be used to reduce GHG in several sectors

– Presently only 1 percent of those allowances are for activities in surface transportation sector

– Bill won’t pass in 2008 unless Senator Boxer can secure 60 votes for a bill she supports

• Senator Boxer will include additional funding for transit and related local government activities

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Climate Change LegislationClimate Change Legislation

•House wrestling with either an economy-wide cap-and-trade system or carbon tax

• Speaker Nancy Pelosi has established Climate Change Task Force to develop policy options

– Expect Task Force to advance a proposal for House consideration this year

•House and Energy and Commerce Chairman John Dingell proposed a 50 cent per gallon gasoline tax

•House waiting to see if Senate can pass bill

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Alliance Between Local Government and TransitAlliance Between Local Government and Transit

• Affects of Failing to Address VMT Growth

– Won’t achieve GHG targets and will worsen effects of global warming

– Greater burden on utility sector to achieve GHG emission reductions

• Seek to build alliance between local elected officials and transit to support Carper amendment

• Need to communicate need for similar policies in House bill

• Sign-on letter of more than 30 cities, transit properties, and coalitions supporting more monies for transit and local government activities

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Is it ISTEA Time for Transit?Is it ISTEA Time for Transit?

• ISTEA resulted in significant restructuring of highway program

– National Highway System, Surface Transportation Program and Congestion Mitigation and Air Quality Program were created

– Major Investment Study was established to guide decision-making for major projects

• No significant change in federal transit program since 1982

• APTA in midst of reauthorization efforts to look at current program structure

– Discussions underway to reform Rail Modernization and New Starts programs

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Shifting Surface Transportation “Ocean Liner”Shifting Surface Transportation “Ocean Liner”

•Gasoline Tax

– Highway Trust Fund enters deficit in FY 2009

– Surface Transportation Commission supports 25-40 cent a gallon increase

– Unsustainable in future due to increase in CAFÉ standards and growth of hybrid-electric vehicles

– Revenues from cap and trade aren’t available until at least 2012 or 2013

– Must secure short-term funding source while Congress wrestles with long-term solution

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Funding OptionsFunding Options

• Value Capture

– Tax Increment Finance Districts

– Benefit Assessment District

– FTA Joint Development Authority

– Create carrot in New Starts program to reward value capture

• Tolling/Congestion Pricing

– Agreements must provide for transit service in project corridor

– Non-compete clauses should not preclude transit investment

– New York City seeking “cordon pricing” for Lower Manhattan

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Funding OptionsFunding Options

• Vehicle Miles Traveled Tax

– Track usage of roads through transponder

– Capture tax through mileage reported to insurance companies

• Carbon Tax

– $10/ton tax would raise $50 billion if surface transportation is included

– Would Congress allow for both carbon tax and gasoline tax?

• Emission Trading

– Transit through service expansions and alternate fuel vehicles will have offsets that would have value

– Transit investments combined with land use and economic development strategies would have value

– Need to develop means to measure GHG reductions

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Do New Goals Force Policy Changes?Do New Goals Force Policy Changes?

• If Climate Change bill establishes regional goals, does this lead to an expanded and revised CMAQ program?

• If program categories are reduced, does this enhance role of MPOs?

•Does the current 80/20 split between highways and transit still apply if there are new revenues that focus on reduction of GHG emissions?

– Surface transportation should receive proportionate share of any carbon tax since 67% of all oil is consumed by autos and trucks

– 28-33 percent of all GHGs in transportation and 60 percent from autos and trucks

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Are MPOs up to the Challenge?Are MPOs up to the Challenge?

• Must slow growth of VMT and reduce GHG Emissions

• Mobility Manager Role

– Surface transportation investment and land use decisions must achieve GHG and VMT goals

– Develop models to capture GHG emission effects of decisions

– Projects and land use decisions have value in emissions trading world

• Engage community to decide how to accommodate population growth, new jobs and housingSource: Envision Utah

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Metropolitan Standard for TransitMetropolitan Standard for Transit

• Cities over one million should have a diverse transit network, including rail, streetcars and rapid bus

• The federal government would match 50 percent of local and state expenditures and 60 percent if value capture strategies are used

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Expand Housing Availability and Pedestrian AccessibilityExpand Housing Availability and Pedestrian Accessibility

• Transit service provided within ½ mile of every household in urban areas

• Expand accessibility for transit dependent

• Remove barriers to higher density housing adjacent to transit

• Coordinate housing and transportation plans and investment

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Establish Sustainability DistrictsEstablish Sustainability Districts

• District is defined by property within “walking distance” of transit station

• Mixed use development areas that promote pedestrian activity

– Establish affordable or workforce housing goal

• Measurable GHG and VMT reductions

• Fill funding gap by - -

– Tax incentives

– Increased bonding capacity

– Distribution of allowance monies created by climate change legislation

– Eligibility as a “credit” for utilities or other GHG emitters seeking “offsets”

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Further Incentives for Clean Fuel Bus FleetsFurther Incentives for Clean Fuel Bus Fleets

• Congress establish goals for clean fuel bus fleets

• Expand Clean Fuel Bus Program

• Fleet investments could attract entities looking to offset GHG emissions

• Must document GHG emission reductions

Photo Courtesy of King County Metro

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•Highway Formulas based on VMT growth and lane miles

– Should Congress reward VMT growth in light of global warming and growing dependence on foreign oil?

•Highways and Transit

– Maintenance Programs – is focus on lane miles for programs or revenue miles appropriate?

– Capital Programs – shift to funding projects that reduce VMT and GHGs while recognizing the importance of metropolitan areas on the nation’s economy

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• Rethink emphasis on congestion

– FHWA historically defined congestion in term of level of service – led to expansion of roads

– In carbon constrained world and in light of global warming – shift to VMT reduction

• Certain cities would welcome congestion since it means the economy is healthy

– Measure VMT reduction in terms of bicycle and pedestrian oriented development, shift to transit, reduce trips and trip length through more compact growth, i.e. “trip not taken”

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•New Starts/Small Starts

– Provides funding for major transit capital projects

– FTA relies on evaluation criteria to determine which projects advance through the process

• Cost effectiveness is focused on “travel time savings”

• “Cost effectiveness” receives 50 percent weight

– Similar to highways, rewards sprawl and less compact development by encouraging fewer stations and more distance between stations

– In carbon constrained and global warming world, need to reward projects that increase density, reduce VMT and cut GHG emissions

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Public-Private Partnerships/Project DeliveryPublic-Private Partnerships/Project Delivery

• Separate project finance from project delivery

• Amend New Starts program and FTA Circulars to allow

– Design, Bid, Build; CM at Risk, etc.

• Penta-P intertwined project delivery, public-private partnerships and tolling/congestion pricing

– Use of alternate project delivery approaches not dependent on source of financing

– Private sector needs a return on investment through enhanced property values, farebox recovery, improved efficiencies, etc.

• Encourage review of paper by William D. Anker, Ph.D., “Road Pricing, Tolling, Mega-Projects, and Other Multi-Modal Opportunities: Strategically Positioning Public Transportation”

– Raises issues public transit should consider in this debate

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QUESTIONS

Documents

Copyright © 2008 Holland & Knight LLP All Rights Reserved TFLEX April 2008 Workshop: Federal Funding Issues April 8, 2008 Jeffrey F. Boothe 2099 Pennsylvania