Federal Transportation Bill Has Implications for Cities

Written by Amanda Maher

The newly authorized federal transportation bill, Fixing America’s Surface Transportation (“FAST”) Act, was volleyed between the House and Senate for several months. Both Democrats and Republicans added provisions to the deal, including a last-minute $3 billion rider related to crop insurance. The final five-year, $305 billion FAST Act made it to President Obama’s desk just one day before the scheduled expiration of the current highway bill, and represents the first long-term national transportation spending package in a decade.

A majority of the funding will come from the reauthorization of the $0.184 per gallon federal gas tax, which will generate an estimated $34 billion per year. The bill authorized $70 billion in “pay fors” (cuts or tax increases related to non-transportation projects) to close the budget shortfalls. Some have expressed concern that the bill remains far from financially sustainable.

The FAST Act keeps funding levels at roughly the same levels as previous authorizations: $225 billion for highways, $61 billion for public transportation, $10 billion for passenger rail and $7 billion for highway safety programs. Despite demographic shifts with more residents returning into the urban core, the funding structure still overwhelmingly supports highway projects over investments in public transit and transit-oriented development (TOD) projects.

However, the FAST Act does have some positive implications for urban transportation projects.

Reduction of TIFIA Project Cost Requirements. The Transportation Infrastructure Finance and Innovation Act (TIFIA) provides credit assistance to transportation projects with national or regional significance. Under current guidelines, to qualify for loans using the TIFIA Program, a project must be more than $50 million in size. This loan requirement cut off all but the largest projects in the largest cities. The new transportation bill lowers that threshold to $10 million, which will make it easier for smaller communities or developers (through public-private partnerships) to access TIFIA to finance transit-oriented development projects.

Support for TOD projects via RRIF Program. One provision in the FAST Act reforms the $30 billion Railroad Rehab and Improvement Act (RRIF) program to give access to developers, through joint ventures, to finance TOD projects – both commercial and residential – near passenger rail stations.

Passenger rail included for the first time ever. As previously noted, the majority of FAST Act funding is relegated to highway projects. But in a major win for transit advocates, passenger rail was included in the surface transportation authorization for the first time. Previously, Congress considered funding for passenger rail through a separate legislative process.

“Complete Streets” policy is adopted. Cities have been leading the charge to adopt “Complete Street” policies, which consider all users of transportation infrastructure: pedestrians, bicyclists, transit users and passenger vehicles. Yet often, when municipalities propose their projects’ designs at the state level, states reject these policies in favor of designs that accommodate higher travel speeds and wider lanes. The new transportation bill requires all design for National Highway System roadways to consider access by all users as a means of improving safety on federally funded roads.

The bill also contained some provisions that may challenge cities that depend on this federal funding.

The budget for TIFIA projects is drastically reduced. Although it will be easier for projects to qualify for TIFIA loans, available funds were reduced from $1 billion to $275 million, leaving a smaller pool of money for communities and developers.

The TIGER program has been excluded. The FAST Act did not reauthorize the popular TIGER discretionary grant program, which has pumped $4.6 billion to 381 infrastructure projects since its inception in 2009. The competitive grant program is designed to invest in shovel-ready projects that will catalyze significant new economic growth in cities and regions throughout the country.

Infrastructure funding remains flat and unsustainable. Aging infrastructure is a threat across the country, but Congress has kept funding for infrastructure improvements at essentially the same levels as authorizations in years past. What’s more, there is not a sustainable funding mechanism to pay for what has been budgeted: Congress did not raise the federal gas tax, which has remained at the same level for 20 years. As a recent Bloomberg View editorial pointed out, revenues from the gas tax have not kept up with inflation. Advances in fuel efficiency and technologies such as driverless cars could also have an unpredictable impact on revenues from the gas tax.

Some lawmakers have called the bill a good starting point for future improvements. House Transportation and Infrastructure Committee Chairman Bill Shuster told reporters that “as soon as the president signs [the FAST Act], we’ve got to bring the stakeholder community to the table” to come up with a long-term fix.

For cities with critical infrastructure projects that were on the line, “not great, but pretty good” will have to do for now.