House Transportation Committee Holds Hearing on Infrastructure Policy, Funding
February 2, 2017
In the first of what will surely be many Congressional hearings on highway policy this year, the House Transportation and Infrastructure Committee heard from executives at FedEx, Cargill, BMW, and Vermeer Corp., as well as the AFL-CIO. The hearing was widely bipartisan, and lawmakers called it a good first step in the process of developing a massive infrastructure plan. But it remains clear that Congress and the White House still have a long way to go before they can agree on a viable path forward to raise the necessary revenue to improve the nation's transportation system.
President Donald Trump has made infrastructure improvements a top priority for his Administration, calling for an additional $1 trillion in infrastructure investments. The details of his approach have been scant, however. His key advisers have proposed a variety of revenue-raising mechanisms, primarily providing billions of dollars in tax breaks to private investors to finance toll roads, toll bridges, and other projects that generate their own revenue streams.
NATSO has long supported enhanced investment in surface transportation infrastructure, but believes direct federal spending -- rather than simply private sector capital -- is necessary to do it effectively. Legislation that relies on private investment and tax credits could lead to undesirable revenue schemes, such as tolling and rest area commercialization.
The Alliance for Toll-Free Interstates (ATFI), of which NATSO is a founding member, sent a letter to all members of the House Transportation Committee ahead of the hearing calling on the panel to "reject tolling of existing interstates as a financing method" as lawmakers work on an infrastructure package in the coming months. "ATFI members have serious reservations about the potential for over-reliance on private investment to fund improvements to our highway infrastructure; such scenarios invariably lead to functional monopolies that subject users to exorbitant, regressive tolling rates," the letter said.
NATSO has long advocated for increasing the motor fuel excise tax as the most effective way to raise revenue for infrastructure. Members of Congress, however, have been reluctant to raise fuel taxes because of perceived adverse political consequences.
Witnesses at the Feb. 1 hearing were pressed on whether they think relying on "public-private partnerships" -- the cornerstone of Trump's proposal floated on the campaign trail -- was sufficient. All witnesses agreed that private financing alone cannot solve the country's infrastructure needs.
FedEx CEO Fred Smith testified that "what needs to happen is to increase the gasoline and diesel taxes" on the national level. Smith said he expressed the same sentiments earlier in the week to the administration.
The Transportation Committee's top Democrat, Peter DeFazio (D-Ore.), unveiled a proposal at the hearing that would index federal taxes on gasoline and diesel fuel to construction-cost inflation. Under the plan, the Treasury Department would be directed to issue 30-year bonds that would finance transportation infrastructure projects by bond repayments made using the indexing formula.
Rep. DeFazio said his proposal would increase fuel taxes by 1 cent per year, and would not add to the federal budget deficit. Federal taxes on gasoline and diesel are currently 18.4 cents and 24.4 cents per gallon, respectively, and neither tax has been raised since 1993. The tax has lost approximately 40 percent of its purchasing power over time due to inflation. This, combined with improving vehicle fuel efficiency, leaves the Highway Trust Fund with insufficient funding to pay for necessary improvements to the Interstate Highway System.
Also on Feb. 1, Sen. Deb Fischer (R-Neb.) introduced legislation that would temporarily redirect some Customs and Border Patrol revenues toward the Highway Trust Fund. The legislation, called the Build USA Infrastructure Act, would redirect $21.4 billion every year for five years starting in 2020 (when the current highway bill expires). Sen. Fischer's legislation would also allow states to remit some of the federal highway funding they receive in exchange for gaining control over determining whether an infrastructure project complies with federal requirements -- a process currently run by the federal government that many argue results in unnecessary expenses and delays. Ten percent of the funds that states voluntarily remit to the federal government would go toward the Highway Trust Fund.
Senate Democrats on Jan. 24 introduced a $1 trillion infrastructure plan, laying down a marker for President Donald Trump. The plan, which is still just a political document and not in legislative form yet, includes $210 billion to repair crumbling roads and bridges, $100 billion for energy infrastructure, and reportedly would create 15 million jobs all through direct federal spending. Democrats have said they would pay for the infrastructure plan by closing tax loopholes, although they have not specified which ones.
The Feb. 1 hearing was an initial, high-level examination of the current state of play. Congress is unlikely to consider infrastructure policy in earnest for several months, as Republican leaders have prioritized healthcare reform and comprehensive tax reform over infrastructure policy.
FedEx, in its testimony, also urged Congress to allow the freight industry to rely on twin 33-foot trailers nationwide to increase productivity. A nationwide adoption of the longer combination trailers (from 28 feet to 33 feet) has long been supported by the less-than truckload (LTL) community, which recently joined Americans for Modern Transportation, a coalition of shippers and retailers that plans to urge Congress to support the nationwide access of the trailers. In addition to FedEx, UPS and Amazon have also joined the coalition.
Critics of the longer trailers -- namely truckload carriers -- fear a repeat of what happened when the LTL sector first introduced twin 28s and truckload carriers, facing pressure from shippers, had to increase the size of their trailers from 48 feet to 53 feet to compete. Those critics argue that if the twin 33 proposal is enacted, in order to compete with LTLs, truckload carriers would have to forego the use of the single 53-foot trailers and switch to twin 33s, which would be costly.
Given this divide within the trucking industry, Congress is unlikely to consider legislation expanding permissible truck size.