Transit agencies plan their moves as Congress dances around funding questions

— by Julie Sneider, senior associate editor

When President Obama's fiscal-year 2016 budget proposed specific steps to invest in the nation's transportation infrastructure to the tune of $478 billion over six years, it was just what transit agencies longed to hear. Proposed last month, the budget, which included a reworked version of the Grow America Act that the president proposed last year, called for a significant increase in transit funding and infrastructure investment.

If enacted, Obama's proposal would be a step forward for the transit industry, according to the American Public Transportation Association (APTA). For instance, the budget calls for $18.4 billion for the Federal Transit Administration in 2016, up from $11 billion in 2015. Transit Formula Grants would receive $13.9 billion, while New Starts funding would get $3.25 billion.

And, as he has called for in the past, Obama wants to consolidate rail programs into a restructured Transportation Trust Fund. As part of that, he is seeking $2.3 billion for a Rail Service Improvement Program that would expand and improve rail networks — including $825 million for positive train control — across the country, APTA officials say. Also in the budget: a $750 million increase over the 2015 appropriation to the Transportation Investment Generating Economic Recovery (TIGER) grant program; an additional $6 billion over six years for the Transportation Infrastructure Finance and Innovation Act (TIFIA); and the creation of a national infrastructure bank.

But while Obama's latest transportation recommendations may sound appealing to transit and passenger-rail supporters, they'll likely have to wait months — if not into next year — to see which direction Congress will swing on funding over the long term.

Will Congress be a dependable partner by passing a long-term infrastructure bill that would enable transit agencies and state departments of transportation some certainty when it comes to planning capital expenditures? Or, will Congress continue to dance around the question of how much and how long it should fund surface transportation programs?

It's an either/or proposition that transit executives face in some form during every budget deliberation season and when surface transportation reauthorization legislation expires. In the case of the latter, the deadline is coming up fast: Congress extended the current law, known as MAP-21, to May 31. Originally, the two-year law was set to expire Sept. 30, 2014.

In recent years, lawmakers have passed short-term measures that leave transit industry leaders with a less-than-ideal time frame to prepare for major construction projects or equipment procurements. In his Feb. 11 testimony before the House Transportation and Infrastructure Committee, U.S. Transportation Secretary Anthony Foxx said as much: Over the past six years, Congress has funded the nation's transportation system with 32 short-term measures, including MAP-21's extension.

The rationale for Congress passing a multi-year bill with predictable, dedicated revenue for transit couldn't be more clear, industry leaders say. In one measure of the nation's "underinvestment" in surface transportation infrastructure — the World Economic Forum's Global Competitiveness Report for 2014-15 — the United States ranked 15th in the world for the quality of its rail infrastructure. Also, the American Society of Civil Engineers has estimated the mounting cumulative cost to the nation of its deficient and deteriorating transit-rail conditions will balloon to $171 billion by 2020 from $41 billion in 2010. For intercity rail, the costs will jump to $10 billion from $2 billion.

For its own purposes, APTA has calculated that the transit industry needs about $245 billion over six years to meet scheduled capital replacement needs as well as the projected demands for growth. Among rail-related costs, APTA estimates more than 16,500 commuter-, light- and heavy-rail vehicles will need to be replaced over the next six years at a cost of $37 billion.

The current state-of-good-repair backlog alone is estimated at $88 billion, says Art Guzzetti, APTA's vice president-policy.

APTA would like to see federal sources support about $100.3 billion in public transit needs over a six-year surface transportation authorization bill.

"Having that federal funding certainty is definitely vital," says Guzzetti. "It's vital not just from the perspective of transportation providers — the state departments of transportation and transit agencies — but also for businesses. It's a public-private partnership. About 78 percent of transit capital funding goes right to the private sector."

As of late February, uncertainty over federal transportation funding prompted at least two state DOTs — Arkansas and Tennessee — to delay projects in their states, Guzzetti noted. With MAP-21 winding down, construction-season decisions have to be made well before May, and the same forces apply to transit agencies, he says.

For instance, the Southeastern Pennsylvania Transportation Authority's (SEPTA) capital budget is about $571 million this year, with about 40 percent of that expected to come from federal sources. While federal dollars slated for this year's budget appear to be certain, the federal portion of future budgets remains uncertain.

"First and foremost, a lot of our capital projects are huge. And if you're talking about a rail procurement, it takes multiple years and it's extremely expensive," says SEPTA General Manager Joseph Casey. "If you're talking about a major renovation — we did one on our Market-Frankford Elevated Line, which cost $600 million and took three or four years in construction and more than that with engineering — it's extremely difficult to commit to those projects if you don't have predictable funding from federal sources."

Not knowing what will happen on the federal funding front before May 31 also impacts the businesses that the agency would contract with for projects, says SEPTA Chief Financial Officer and Treasurer Richard Burnfield. For example, the agency typically enters multi-year contracts to replace buses, about 100 per year. While this year is set, the agency held off starting the procurement process for a four-year contract until "we see how things transpire in Washington," he adds.

Uncertainty also affects the ability of transit agencies and state departments of transportation to use federal sources as a revenue pledge when issuing debt for major projects, Burnfield says. Last year, some rating agencies downgraded such debt that was secured by federal transit funding or federal highway funding due to uncertainty over whether Congress would reauthorize MAP-21.

Politics Adds To The Pressure

To be sure, convincing a Republican-controlled Congress to pass legislation calling for a new source of tax revenue to pay for an increase in transportation programs would require some fancy footwork, politics-wise. Still, the pressure on lawmakers to act is intensifying. Not only does the MAP-21 extension expire at May's end, the Highway Trust Fund — which pays for transit and highway projects out of federal gas tax proceeds — is running out of money. The tax, which has been stuck at 18.4 cents per gallon since 1993, is no longer enough to pay for the nation's transportation infrastructure needs.

One positive signal is that some congressional leaders from both parties started the new session in January calling for a long-term bill, notes OneRail Coalition Director Anne Canby. Both the House Transportation and Infrastructure Committee (T&I) and the Senate Environment and Public Works Committee (EPW) have begun holding hearings on the matter. House T&I Chairman Bill Shuster (R-Pa.) has said he wants a six-year bill and EPW Committee Chairman James Inhofe (R-Okla.) has expressed a commitment to a long-term bill, as well.

Moreover, discussions over potential funding mechanisms — from raising the gas tax to repatriating overseas profits of U.S. corporations to allocating fees from increased domestic energy production to the Highway Trust Fund — also have emerged from both sides of the aisle. While many politicians are loath to seriously consider a gas-tax hike, at least ideas are circulating.

"I think the discussions for a bill are occurring, and there are more people within the Congress who say that's really important and that's a positive thing," Canby says.

"It would be ideal to have a long-term bill so that leaders of transportation agencies can predict, plan and invest more intelligently than they are able to do under the short-term stuff."

One thing Canby, APTA and other advocates of transit say they definitely don't want to see is another attempt by some lawmakers to strip the mass transit account from the Highway Trust Fund. Since President Ronald Reagan signed the law in 1983, 20 percent of the fuels tax revenue has been dedicated to rail and bus systems, and 80 percent to highways. During the debate over MAP-21 in 2012, some GOP members of Congress introduced a measure to preserve gas-tax revenue solely for highways. After raucous debate, that argument was stopped by pro-transit legislators. 

So when some Republican members of the House T&I Committee raised the idea again last month, APTA President and Chief Executive Officer Michael Melaniphy fired off a statement condemning the idea.

"Such an idea would be catastrophic for public transportation systems nationwide and would hurt the millions of Americans who use [transit] every day in growing numbers," Melaniphy said. "Additionally, public transportation is an important economic lifeline for Americans in all size communities, since nearly 60 percent of the trips taken on public transit are for commutes to and from jobs. Removing Americans' access to jobs is not good policy."

Canby believes Shuster won't allow the transportation authorization debate to be sidetracked by arguments over the mass transit account.

"That's an apple cart we don't need to kick over," she says.

What About Amtrak?

But Canby would like to see a rail title included in the next surface transportation authorization bill so that Amtrak funding isn't treated under a separate passenger-rail bill. She hopes the Passenger Rail Reform and Investment Act of 2015 (PRRIA) measure that T&I unanimously passed last month — and was expected to hit the House floor in early March — will be wrapped into the broader transportation funding bill. (Editor's note: The bill passed the House on March 4, after Progressive Railroading's press time.) PRRIA 2015 is nearly identical to the version the committee passed in the last session.

Jim Mathews, president of the National Association of Railroad Passengers (NARP), approves of some streamlining-type reforms contained in the PRRIA bill, but mostly has concerns over its funding levels.

"It's a keep-warm budget," he says.

The bill caps Amtrak's authorization at $1.41 billion in FY2016 and increases it to $1.46 billion in FY2019. It also calls for $300 million annually in infrastructure investments, with about half reserved for the Northeast Corridor (NEC). The amount falls "woefully short" in meeting Amtrak's national network needs, according to Mathews. Instead, it "fragments" the network into the NEC and the rest of the system, pitting those fragments against each other in competing for dollars, he adds.

On the plus side, the bill is bipartisan, which indicates a "philosophical commitment to having a national passenger-rail system," Mathews says. "That, alone, is not a bad place to be."

For Amtrak's part, spokeswoman Christina Leeds issued the following statement in reaction to the T&I's drafting of the PRRIA 2015 bill: "We appreciate the work of Chairmen Shuster and Denham, Ranking Members DeFazio and Capuano and all committee members in crafting a bipartisan passenger-rail reform bill that is needed to sustain and advance the growth of passenger rail in America. We look forward to working with Congress to enact a bill that addresses critical infrastructure needs, improves safety and security, enhances customer service and provides for greater financial efficiencies. These improvements are needed to continue Amtrak's increased ridership, enhanced operating performance and stronger financial performance."

Like OneRail's Canby, NARP's Mathews is seeking a predictable, dedicated funding source for Amtrak in order to avoid the current process of almost yearly battles over funding authorization. As for a long-term transportation authorization, Mathews believes it's more likely that Congress will pass another short-term extension before it tackles a longer authorization bill, especially since the extension deadline comes up in just a few months.

For members of Congress, the most time-consuming part of the transit-funding two-step will be finding consensus over the future sources of revenue.

"The big question is, can Congress come together and get this done? There are a lot of people saying they want to," Canby says. "That's one step. The next step is, can they? Let's hope so."