Getting the Transportation Infrastructure We Need

Bank, Commission, Capital Budget or Business as Usual?

There's a growing consensus the U.S. needs to invest more in our infrastructure, especially our
transportation infrastructure. Too many roads and bridges are in poor repair, and congestion is
slowing the economy of many cities. High gas prices has only added to intense interest nationwide
for new and enhanced public transportation. With the expiration of the SAFETEA-LU legislation, next
year Congress has the opportunity to revise the policies guiding investment in this
critical infrastructure.

Unfortunately, after the interstate highway system, the federal role in transportation
infrastructure is mostly known for its excessive pork barrel spending (bridges to nowhere) and
limited funds and Byzantine policies restricting mass transit investment.

How should we evaluate the various proposals to reform federal policy? The Urban Land Institute (where I am working this
summer) proposed an 8-point "action agenda" for infrastructure in their second-annual infrastructure report. The agenda is a statement of principles that should guide
investments. It includes: build a vision for the community, invest strategically in coordination
with land use, fix and maintain first, reduce driving, couple land use decisions with water
availability, break down government "silos," cut pork barrel spending and support smart growth,
keep score and keep governments accountable.

Taking those principles as advice, let's take a look at what has been proposed.

In preparation for a new surface transportation bill, the federal government set up a National Surface Transportation Policy and Revenue
Study Commission to study the matter and make recommendations. They proposed in their report
creating a new independent public commission to oversee a national transportation plan and make
funding recommendations to Congress. They propose:

National Surface Transportation Commission (NASTRAC) would have ten
presidentially-appointed members serving staggered six year terms. The commission would make
revenue recommendations directly to congress, on which congress could exercise a 2/3
veto.

This proposal seems to solve two problems: the short-sighted approach to funding long-term
transportation infrastructure and the tendency of congress to fund infrastructure through earmarks.
It's biggest weakness is funding -- the commission proposed a hike in the gas tax to fund both new
roads and transit. They acknowledged this approach may become obsolete in our lifetime, but thought
alternative sources like fees and tolls were promising but not the answer yet. I like their emphasis on
depoliticizing the process and tying decisions to planning, not Congressional whims.

Perhaps unsurprisingly, Congress has some different ideas. First, James Oberstar and others
have promoted isolating infrastructure from the regular budgeting process in order to shift to a
long-term perspective. Creating a federal capital budget has been discussed before and would solve
some problems but still keep the decision-making power with congress.

Oberstar and others have also discussed creating an infrastructure bank, a specially-chartered
federal entity charged with investing in major infrastructure. The idea has piqued the interest of
Barack Obama, who includes it in his
transportation fact sheet. Here's what is envisioned by a
version described by a bill introduced by Chuck Hagel and Chris Dodd:

The Dodd-Hagel legislation establishes the National Infrastructure Bank, which as an
independent entity of the government is tasked with evaluating and financing capacity-building
infrastructure projects of substantial regional and national significance. Infrastructure projects
come under the Bank's consideration are publicly-owned mass transit systems, housing
properties, roads, bridges, drinking water systems, and wastewater systems.
Modeled after the Federal Deposit Insurance Corporation, the Bank is led by a five
member Board of Directors, each whom are appointed by the President and confirmed by the
Senate. ... The financing package could include direct subsidies, direct loan guarantees, long-term
tax-credit general purpose bonds, and long-term tax-credit infrastructure project specific bonds.
The initial ceiling to issue bonds is $60 billion. The Bank does not displace existing formula
grants and earmarks for infrastructure. It targets specifically large capacity-building projects
that are not adequately served by current financing mechanisms.

Two congressional committees recently held a joint hearing to
discuss capital budgeting and the infrastructure bank proposals.
An infrastructure bank would solve solves the short-sighted funding problem, and creates a new body to fund large projects beyond existing programs, expanding capital for infrastructure. However as planners are well aware, not all transportation infrastructure is self-supporting. The interstate highway system, many bus and subway lines, and an intercity transportation network would not exist today if each of their parts were required to be self-supporting, but that doesn't mean they are bad investments. I worry it would create additional funds for high-visibility projects, leaving the rest to fight over a limit pool of money.

This brings us to the last option: business as usual. While containing record amounts of pork barrel money, SAFETEA-LU did include funds for biking and transit. Absent federal leadership, many states and cities have been opting for their own bonds and taxes to fund transit projects. Maybe the feds should just worry about big stuff like airports and intercity passenger rail, and leave the rest up to states and cities to worry about.