NATSO Analysis: Chairman Shuster Infrastructure Proposal

This week retiring House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) released draft legislation outlining his vision for enhanced infrastructure investment.  The draft legislation is designed to facilitate a process whereby the United States can recalibrate how it pays for infrastructure as it moves into the middle part of the 21st Century, while at the same time providing a mechanism to adequately fund such investment in the near-term as the process plays out.  Although many stakeholders -- including NATSO -- object to certain provisions in the draft legislation, it nonetheless represents a important continuation of -- and positive shift in -- the discussion President Trump started when he released his own infrastructure proposal earlier this year.

The draft legislation stands little chance of becoming law, but it was not designed to become law. Instead, it was designed to "keep the conversation alive," and illustrate to policymakers what a comprehensive infrastructure plan can look like in legislative language.In this respect, it is akin to what former House Ways and Means Committee chairman Dave Camp (R-MI) did in 2014 with respect to tax reform. Policymakers and their aides who worked closely on last year's tax overhaul acknowledge that the framework Rep. Camp released in 2014 helped in a variety of ways, both substantive and political. It is Chairman Shuster's hope that his draft legislation will serve a similar purpose as future Congress's consider infrastructure legislation.
 
Near-Term: Raising the Fuel Tax and Other Transportation User Fees
The draft legislation calls for phasing in a 15-cent gasoline and 20-cent diesel tax increase over three years.  After three years, the taxes would be indexed to inflation. Importantly, the legislation also would begin taxing infrastructure users that can currently avoid taxation: Specifically, it establishes a 10 percent user fee on electric batteries and adult bicycle tires.  It also eliminates full and partial fuel tax exemptions for public transit and intercity buses. 
 
These fees would be extended through 2028, thereby facilitating a multi-year reauthorization of the Highway Bill.
 
NATSO supports increasing user fees in this manner. NATSO has long advocated raising the motor fuel excise taxes as the most efficient, equitable mechanism to increase infrastructure investment, and Chairman Shuster's legislation would do that.  Additionally, by increasing payments made by users of electric vehicles and public transit, the legislation would capture a larger swath of infrastructure users and ensure everyone pays a fair share.  
 
Long Term: Establishing a Commission to "Fix" the Highway Trust Fund
The draft legislation would establish a 15-person Highway Trust Fund Commission to develop a legislative proposal to ensure the Trust Fund's long-term solvency.  The Commission's recommendation would be expedited in Congress and receive an up-or-down vote in both chambers.  Importantly, the Commission would be precluded from recommending a tax on fuels. In the event Congress does not adopt the Commission's recommendations, the increased motor fuels excise taxes would remain in effect.
 
That Chairman Shuster saw fit to recommend establishing a Commission amounts to a harsh (though not unreasonable) indictment of Congress's ability to tackle big problems.  Establishing a Commission is the standard approach for Congress to outsource politically treacherous decisions to an impartial group. The approach has historically been utilized with respect to lowering the national debt and reforming entitlement programs, and military base closures. It is unfortunate that investing in the country's infrastructure has now entered this category.
 
Vehicle Miles Traveled Tax Pilot Program
The draft legislation would create a voluntary pilot program to test the feasibility of a nationwide per-mile user fee to replace the motor fuels excise tax. Under this program, the federal government would provide different ways to track mileage (e.g., apps, in-car diagnostic systems, manual reporting by states, etc.).  The IRS would provide refunds to participants in the pilot program that already pay fuel excise taxes at the pump.
 
Between this pilot program and the provision to tax electric vehicle batteries, the legislation is an important step to ensuring that electric vehicle users pay their fair share toward infrastructure. One of the biggest critiques of fuel taxes today is that it exempts EVs. Taxing batteries and/or vehicle miles traveled taxes would eliminate this concern. 
 
No Calls for Tolling or Rest Area Commercialization
The legislation does not call for eliminating or reducing federal restrictions on tolling existing interstates or commercializing interstate rest areas. In this respect, it is an extremely positive move away from the Trump Administration's proposal, which directly called for repealing federal prohibitions on those activities. While the "Commission" to study alternatives to funding infrastructure (discussed above) could conceivably recommend tolling and commercializing rest areas, these approaches have historically been designed to supplement the Highway Trust Fund rather than  it.  It would amount to a transparent dereliction of duty for the Commission to recommend tolling or rest area commercialization, and it would be unlikely that Congress would adopt such recommendations. 
 
Congressman Shuster's draft legislation will replace the Trump Administration proposal and be the new "benchmark" that forms the foundation for future discussions of infrastructure legislation.  This is a very positive development for NATSO members, since not only does Shuster's legislation not call for tolling or commercializing Interstates, but it recognizes the integral role that fuel excise taxes play in funding the Highway Trust Fund, and also gets the ball rolling on adjusting these mechanisms to comport with the next generation of transportation habits and technology.  
 
President Trump's proposal relied on leveraging private sector capital through "public private partnerships" (or PPPs) to enhance infrastructure investment.  NATSO has always maintained that PPPs may make sense for certain infrastructure projects, but not surface transportation. Chairman Shuster's draft legislation appears to recognize this, limiting its facilitation of PPPs to public building construction and rehabilitation projects rather than highways and bridges.  
 
Accelerating Project Delivery
The draft legislation would accelerate project delivery by proposing to make permanent the Trump Administration's "One Federal Decision" policy.  This policy establishes a schedule for finalizing a decision on environmental reviews of infrastructure projects within two years.  It also expands categorical exclusions and creates a pilot program to allow innovative approaches to environmental review in lieu of the standard National Environmental Policy Act (NEPA) process.  The legislation also reforms clean water permitting.
 
NATSO generally supports efforts to responsibly accelerate project delivery timelines.  These provisions likely will turn off many Democrats, who generally support robust environmental analysis of infrastructure projects, but amounts to an important nod to the Trump Administration's proposal and thus will make the Administration more inclined to accept this legislation's recommendations. 
 
Next Steps
As noted above, this legislation is unlikely to become law, but it is not designed to become law. It is designed to continue a conversation and act as a "starting point" for future congressional efforts to enact infrastructure legislation.  Regardless of what happens after the midterm elections, infrastructure legislation is one of the few areas where bipartisan collaboration and compromise is within reach. The current Highway Bill (known as the FAST Act) expires in 2020, which means Congress will be forced to confront infrastructure policy before the next presidential election.  
 
NATSO will continue to represent the interests of travel plazas, truckstops, and off-highway fuel retailers as the process unfolds.
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David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov direct's NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More
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