2. Infrastructure Indecision
Sept. 30, 2011, marked the two-year anniversary of the expiration of legislation authorizing federal surface transportation programs. With Congress unable to reach agreement on a new bill, those programs have been operating under a series of temporary extensions since 2009, the latest of which expires at the end of March. That’s led many state departments of transportation to seek new strategies and tools to meet their growing infrastructure needs.
“The lack of a long-term federal authorization, in conjunction with the economic downturn, has limited (the Maryland Department of Transportation’s) ability to add new, larger, multi-year projects to our capital program,” said Maryland Transportation Secretary Beverley Swaim-Staley. “The uncertainty has forced (the department) to focus on system preservation and relatively small projects.”
That change of focus has depleted the state’s supply of so-called “shovel-ready projects,” Swaim-Staley said.
“We had to weigh the benefits and costs of our focus on small system preservation construction projects versus the expense of the necessary planning and engineering required to maintain our project pipeline and make this tough decision. This has caused our pipeline of projects that are ready to move to construction to dwindle, and it will take a while for us to build up that pipeline in order to bring larger projects to construction on a timely basis.”
The focus on smaller projects also has meant construction firms in the state are feeling the pinch.
“Smaller system preservation projects have enabled us to maintain our transportation system, but such a program barely maintains the construction capacity of the private sector,” Swaim-Staley said.
During the 2011 legislative session, Maryland lawmakers approved measures to generate an additional $80 million annually for transportation. Tolls are doubling in November on some Maryland highways to offset declining tax revenues and allow the state to pay off debt. The state also is exploring public-private partnerships to help fund infrastructure investment. While these strategies are helpful, Swaim-Staley said, Maryland also has created a Blue Ribbon Commission on Transportation Funding to examine long-term funding issues.
“The commission was established to explore new revenue streams and funding mechanisms regardless of the situation at the federal level,” she said. “That said, the lack of a reauthorization bill has given the commission an added sense of urgency.”
The commission, which earlier this year recommended lawmakers try to raise an additional $800 million in transportation revenue annually, is expected to issue a final report by the end of the year.
But lawmakers in Maryland, as in other states, have been reluctant in the past to raise the state gas tax, the traditional source of transportation revenue. Maryland’s tax has remained unchanged at 23.5 cents a gallon since the early 1990s. And a continuing stagnant economy may make such an increase politically challenging in the near future.
Still, states like Maryland are recognizing that it could be a long wait at the federal level with little fiscal reward at the end of the tunnel. The House and Senate appear to be far apart on a new authorization bill. A Republican-led House committee has proposed a six-year bill that would provide substantially reduced annual funding levels for transportation and rely solely on available revenues from federal gas taxes. A Democrat-led Senate Committee has proposed a two-year bill at levels closer to what states have seen the last few years, but which could require lawmakers to come up with additional revenues.
Despite the increased certainty that a longer-term bill could provide, Swaim-Staley would prefer something closer to the Senate proposal. The one thing she and many state officials don’t want to see is more extensions.
“The continued uncertainty that would come with additional extensions is something that we hope to avoid,” she said.
Such an outcome could have even greater ramifications than just continued uncertainty for state governments.
The global rating agency Fitch Ratings reported in September that if Congress continues to pass extensions through 2012 without any progress on a longer-term reauthorization, the agency could lower its opinion of the strength of the federal program and downgrade the ratings on grant anticipation revenue vehicle bonds lacking a state back-up pledge. Such bonds allow states to accelerate construction timelines and spread the cost of a transportation project over its useful life rather than just the construction period.
Still, continued uncertainty could be the result if lawmakers are unable to find common ground during what’s likely to be a contentious election year in 2012. That could mean more infrastructure indecision, which could have a profound impact on state budgets, construction jobs, already crumbling infrastructure, traffic congestion, safety, the cost of goods and services and economic competitiveness for years to come.