Emil Frankel and Janet Kavinoky: We're Fixin' to Do Some Transportation Investment: Let's Do It Right
February 12, 2018
As a candidate and in his first year as president, Donald Trump has derided the condition of America’s infrastructure and pledged that, as president, he would “rebuild America.” Although not all the details have been made public, the basic elements of the Trump administration’s long-promised $1 trillion infrastructure proposal are now generally known. Of course, we are only at the beginning of the process. Congress will determine the final provisions of the legislation—including how to pay for it and how the money will be invested—after the administration proposes principles and legislative concepts.
As we begin this process, we must remember that the issues that need to be addressed go beyond funding. Most experts acknowledge that $1 trillion, let alone the $200 billion that the Trump administration will propose, is nowhere near enough to bring American infrastructure to a state of good repair. Estimates of the amounts necessary to achieve that condition are as high as $3 trillion.
It is unimaginable that such sums will be allocated to the task of rebuilding America. The level of funding will almost certainly be inadequate to the task, and investment resources will be constrained. Therefore, it is essential that, whatever the level of new funding, available resources should be invested in the projects and programs that will bring the greatest economic, social, and environmental benefits. The primary task, in the words of the National Surface Transportation Infrastructure Financing Commission in its 2009 report, is to make “wise investments” (NSTIFC 2009).
Moreover, despite deteriorating and congested highways, bridges, and tunnels; inefficient and out-of-date airport terminals; and failing water systems, “not everything is broken,” as a 2017RAND Corporation study has concluded (Knopman et al. 2017). Careful and informed decisionmaking should characterize any new infrastructure investment program, and decisions should be informed by analysis of potential benefits, rather than engineering or political factors alone. “Lasting changes will require thoughtful consideration of targeted spending priorities, policy constraints, and regional differences,” the RAND report states.
We assume that, as a real estate developer, the president probably knows what success looks like for some specific projects. For others, maybe he expects certain principles to be followed, or outcomes produced, or metrics achieved.
Similarly, as Congress and the administration head into another debate over rebuilding America’s infrastructure, there is an opportunity to incorporate principles that would guide the investment of additional federal dollars into the nation’s transportation system and incorporate better project selection into an investment package.
In other words, as we begin this process, good governance, good policies, and wise investments will be critical to whatever success we can achieve. We hope that the Trump administration and Congress will address the following significant issues, particularly as they relate to the nation’s publicly owned and managed surface transportation systems.
Determine the Federal Role
We are long overdue to redefine or refine the federal or national interest in highways and transit. Since the initial completion of the Interstate Highway System in the 1980s, Congress has struggled with this issue. The first battle came through the enactment of significant reform legislation in 1991, the Intermodal Surface Transportation Efficiency Act. Soon after, calls came from more conservative members of Congress to end the federal role in highways and transit and devolve responsibility for capital investment in public transportation and many highways, roads, and bridges to the states, except for reconstruction and expansion of the Interstate Highway System. Two national commissions established by the 2005 federal surface transportation reauthorization legislation were charged with inquiring into the appropriate federal role, as part of their charters.
It is 2018, and the debate still rages in transportation policy circles. The issue of the scope and character of national responsibility for transportation remains undefined, and, except for funding of so-called national transformational projects, it is not clear that the Trump proposals will clarify the federal role.
What are the appropriate goals and purposes of federal surface transportation funding? We suggest that programs and funding levels should be shaped around the answers to this question. For example, there remains a strong federal interest in assuring safety, connectivity, and accessibility to markets and jobs, and there should be adequate federal funds to advance those interests.
In advancing those national goals, there is a strong federal interest in certain capital projects (often multijurisdictional) that would bring broad and substantial economic benefits to the nation, even though such projects might appear to be more local in character. A project, such as the construction of new rail tunnels and the rehabilitation of the 100-year-old existing rail tunnels under the Hudson River between New Jersey and New York City, can involve a mix of local, regional, and national interests, and the funding levels and proportions should reflect the existence of those mixed interests.
Reform Planning and Project Selection
We hope that the Trump proposals on transportation infrastructure will include recommendations about reforming transportation planning, capital programming, and project selection. Congress has avoided significant reform of these laws and procedures for over 25 years.
Even with an infusion of additional federal funding and the introduction of new incentive and private investment tools, there will not be enough money to “rebuild America” and to bring its infrastructure fully to a state of good repair. The constraints on funding and the gap between available resources and needs require that the wisest choices be made in investing in capital projects.
There is no single system of project selection in the United States. Local, state, and federal governments; regional entities; and committees of people representing diverse interests from every geography imaginable choose projects. As they should.
And project selection is not done in a vacuum by engineers applying objective, mathematical criteria. Planners, who factor in both objective and subjective measures, are involved. Elected and appointed government officials representing the populations they serve provide insight into what is the “right” thing is to do. Career civil servants, paid consultants, and subject-matter experts shape objective criteria. There is no one right way to choose a road, rail, or multimodal transportation project, and there is no single right project or correct method of delivery in, say, both Alabama and Connecticut. Local and state discretion to shape infrastructure to fit the demographics, sociology, economy, geology, geography, policy priorities, and other conditions is paramount.
But at the state and metropolitan levels, the agencies involved in capital programming must have the technical and human resources to apply appropriate analytical processes to evaluate and prioritize projects. Performance standards and cost-benefit analyses should become essential elements of project evaluations and should be required by federal law.
Scarce resources should be targeted toward the projects that will bring the greatest economic, social, and environmental benefits, and the projects selected for investment should be parts of comprehensive strategic investment programs that will enhance the achievement of national goals and purposes.
Ensure Sustainable Funding for Fundamental Highway and Transit Programs
The Trump infrastructure program’s emphasis on federal incentives and on state, local, and private investments in infrastructure—over 80 percent of the $1 trillion program—threatens to push aside the need to establish sustainable, and principally user-based, revenue sources for the federal investment in transportation projects. Federal surface transportation funding has been stagnant for over a decade (except for a slight bump-up in the first year of the Fixing America’s Surface Transportation Act), and the burden to maintain, renew, and modernize surface transportation facilities on states and local transit authorities has continued to grow.
Funding uncertainty constrains public agencies and contributes to short-term thinking. It limits the solutions that public agencies can consider for addressing problems. Although scarcity can give rise to creativity, it can also lead to tunnel vision and risk aversion, which stifles innovation. At a time when infrastructure, especially surface transportation infrastructure, needs to support advanced vehicle technologies, serve aging populations, enable multimodal supply chains, and withstand severe weather and man-made attacks, if there is barely enough money to maintain the current system, we cannot improve it and adapt it for the future.
Some states and local and regional agencies have been up to this challenge and have increased their revenues dedicated to these projects and services, but not all have done so or have been in a position to fully fund the growing needs for infrastructure renewal.
Meanwhile, at the federal level, the Highway Trust Fund (HTF), the principal source of federal funding for highway and transit projects, has struggled with insolvency and has been saved from an inability to reimburse states and local agencies for the expenditure of federally committed capital funds on a timely basis by a steady and growing transfer of general funds. Today, almost one-third of HTF revenues come not from dedicated user fees, but from general taxpayers.
Addressing this issue, and assuring a stream of dedicated and sustainable revenues to HTF, should be a principal part of the Trump proposals and of the eventual legislation Congress adopts. If they do not address the HTF challenge, Congress will perpetuate an 18-year cycle of “kicking the can down the road.” They also risk creating the inaccurate perception that Congress has taken care of its responsibilities with regard to roads, bridges, and public transportation. That perception applies also to airports and the air traffic control system, inland waterways and ports, dams and levees, and clean-water infrastructure.
Have Realistic Public-Private Posture and Pro-Public-Private Policy
The heavy dependence upon private investment (through public-private partnerships and similar mechanisms) and on public and private credit enhancements for transportation infrastructure projects may not be well suited to all states and localities. The principal need for most states and local agencies is to bring their existing assets to a state of good repair. Such programs and projects are often not attractive to private investors. And that is okay. Meeting needs is more important than winning discretionary program competitions. Moreover, many states lack the authorizing legislation, projects, or dedicated revenue streams that can assure adequate returns on private equity investment or the repayment of private or federal loans or loan guarantees, such as the Transportation Infrastructure Finance and Innovation Act and the Railroad Rehabilitation and Improvement Financing programs.
Move Beyond Environmental Streamlining
While speeding up environmental permitting and regulatory procedures and improving coordination between the agencies that handle these processes will improve the delivery of infrastructure projects, environmental regulation is not the only obstacle to delivering many capital projects on time and at a reasonable cost.
In our own experience, state and local procurement rules, limitations on technological innovations in the construction process, and construction work rules often present greater hurdles to the delivering of infrastructure projects on time, within the budget, and in an efficient manner.
One hopes that the Trump infrastructure proposals recommend and would provide incentives to states and localities to reform these rules and procedures. It is instructive that many states still do not even allow design-build project delivery, and many lack authorizing legislation for public-private partnerships. There is much to be accomplished on many project delivery mechanisms that would be far more useful than environmental streamlining alone.
Ensure Asset Resilience
In the context of rising sea levels, increasingly destructive weather events, more frequent flooding, and more powerful storm surges, states and localities should be required to use federal funds— in renewing their infrastructure and undertaking new capital projects—to construct resilient facilities and systems. Funds authorized and provided under the Trump infrastructure proposal should be used to better protect infrastructure from more threatening events.
The Trump administration’s infrastructure proposals and the congressional consideration that will follow should recognize the importance of sustainable and adequate funding and the need for significant reforms in governance and investment decisionmaking at the state, metropolitan, and local levels. The ideal legislation would contain significant incentives for such reforms.
Knopman, Debra, Martin Wachs, Benjamin M. Miller, Scott G. Davis, and Katherine Pfrommer. 2017. Not Everything Is Broken: The Future of US Transportation and Water Infrastructure Funding and Finance. Arlington, VA: RAND Corporation.
NSTIFC (National Surface Transportation Infrastructure Financing Commission). 2009. Paying Our Way: A New Framework for Transportation Finance. Washington, DC: NSTIFC.