To what extent is rail transportation investment at risk?

Conventional wisdom and the partisan rhetoric suggest that a Democratic-controlled Senate and administration — and possibly House, if the power shifts — would be more likely to push for increased transportation investment in general, and rail transportation in particular, many observers say. But transportation investment wouldn't evaporate if Republicans assume power in the Senate and/or the White House, they add.

That said, the list of programs that need to be funded is long and, regardless of who wins next month, the pressure will be on to cut government spending. In short: Funding for rail programs — any rail program — is far from a sure thing.

"It's a lot easier to cut a rail program than Medicare, Social Security or defense, so rail certainly has its work cut out for it," says APT's Arena.

As ever, convincing lawmakers and regulators that there's a distinction made between spending and investment, and that rail infrastructure is a good investment, will be key this election cycle and beyond.

"Even in an era where the priority is cutting government and shrinking spending, transportation infrastructure is not the place for that," NRC's Baker says. "There's a clear role for federal investment and coordination."

Again, though, that's presuming legislators and policy shapers are able to check partisanship at the door and begin to define that role.

"When it comes to infrastructure funding, it shouldn't matter if you're a Libertarian, progressive, Republican or Democrat. We're falling behind our competitors and it doesn't bode well for us long term," says Arena. "An efficient infrastructure system makes the economy hum."

Finding funding sources won't be easy. Everyone agrees that the Highway Trust Fund, which historically has funded federal transit programs, no longer generates enough revenue to cover the nation's massive infrastructure needs. Options include raising the gas tax, implementing user fees, developing infrastructure banks and forging public-private partnerships.

"We all know what the options are — there has been report after report done on it," adds Baker. "The question is, do we have the political will to carry them out?"

Probably not in the near term, if Congress' struggle to come to terms on the surface transportation spending bill is any indication. While the passage of MAP-21 in July provided transit agencies with some funding certainty for the next two years, industry officials say they're concerned about how the $105 billion surface transportation bill will play out once the legislation's rules are written. They're also wondering how transit funding might fare under a congressional sequestration process, and whether the new Congress will get an early start on a long-term surface transportation reauthorization bill.

"No matter who controls Congress or who is in the White House, APTA in early 2013 will go to work with its membership to try to develop ideas, policy directions and perhaps revenue ideas for the next Congress and administration to deal with," says Art Guzzetti, vice president of policy for the American Public Transportation Association (APTA).

Transit officials hope the next surface transportation reauthorization legislation will include an overall funding mechanism for transportation other than the federal gas tax.

During the MAP-21 debate, congressional Republicans and Democrats couldn't reach an agreement on a revenue raiser for highway and transit, "and we look forward to engaging in that discussion and making sure that if there is a revenue raiser, that transit gets its fair share," says Mike McLaughlin, vice president of planning and federal affairs at the Chicago Transit Authority.

"People are voting with their feet," he says. "If you look at train ridership — not just here in Chicago but in places around the country — vehicle miles traveled on the roads have flat-lined and transit ridership has been going up year after year. So we feel as though this is a matter of market-based funding."

TIGER Grants A Potential Target

Maybe it is. But in a spending-sensitive environment, convincing lawmakers to set aside dollars for anything is a tall order, regardless of merit. Witness the Transportation Investment Generating Economic Recovery (TIGER) program.

In June, the U.S. Department of Transportation (USDOT) awarded 24 rail-related projects a total of $297 million in TIGER IV grants. Overall, the TIGER program has been a "good deal" for short lines, says American Short Line and Regional Railroad Association (ASLRRA) President Richard Timmons. The grants have helped to encourage public-private partnerships to improve freight-rail infrastructure, says Genesee & Wyoming Inc. (GWI) Vice President of Government and Industry Affairs Jerry Vest. The program also has been successful in spurring intermodal projects, says Intermodal Association of North America (IANA) President and CEO Joni Casey.

But there's been "quite a bit of criticism" of the TIGER program from House Republicans, NRC's Baker says, noting that some characterize the program as an "administration earmark."

"If either the administration or the Senate flips from Democrat to Republican, we would have some concerns about the TIGER program going away, which would be a shame," he says. "If the administration were to flip to Romney, perhaps then some of the ... House Republicans would have less reason to criticize the program as an administration earmarking program if it was a Republican administration making the decisions."

Future funding opportunities also could hinge on whether Ray LaHood — a staunch freight transportation supporter — changes his mind about leaving his post as U.S. transportation secretary in early 2013, IANA's Casey says.

"We hope that whoever is in that position has the same level of interest and support of the freight industry, and providing funding for projects," she adds.

"Hope" is a word many transportation stakeholders used during interviews last month. In short-line country, they've been using it for quite some time when they discuss the prospects of extending the Section 45G tax credit.

Introduced in 2005, the Section 45G provision of U.S. tax code enables small railroads to claim a tax credit of 50 cents for every dollar spent on infrastructure improvements, up to a cap of $3,500 per mile of owned or leased track. The tax credit helps fund more than $300 million worth of short-line infrastructure work annually, according to ASLRRA estimates.

The tax credit expired on Dec. 31, 2011, and the ASLRRA and its lobbyists have spent 2012 trying to prod Congress to issue an extension. In early August, the Senate Finance Committee approved the Family and Business Tax Cut Certainty Act of 2012, which would extend the Section 45G tax credit for two years retroactive to Jan. 1, 2012. But final action on an extenders package — legislation that would extend expired or expiring tax measures — likely won't occur until late this year, even though "there's no real opposition to it," says ASLRRA's Timmons.

"The challenge is the uncertainty of Congress and the lame-duck environment," he adds.

Next year, the ASLRRA will resume its efforts to secure a long-term extension — the "Holy Grail all along," says Timmons — perhaps in the range of five or six years. But that effort will be difficult because the slate will be wiped clean in Congress, he says.

For now, tax-credit proponents will monitor the election results and hope those who support the cause are re-elected. But when it comes to the tax credit, the short-line lobby isn't terribly concerned about "which party is going to be in control" the next four years, as Baker puts it.

"We feel we've made a pretty good case for the short-line tax credit to continue no matter what," he says.