Historically, state and localities have contributed over 55 percent of transit and highway capital investment and shouldered primary responsibility for the extensive costs of operating and maintaining the system. | Beyond the immediate steps necessary to address the federal funding crisis and position the nation for a new direct user charge system, the Commission believes important steps are imperative to expand the ability of states and localities to use other options to fund non-federal surface transportation infrastructure investment. Historically, states and localities have contributed over 55 percent of transit and highway capital investment, and they have shouldered primary responsibility for the extensive costs of operating and maintaining the system. The Commission believes that carefully targeted federal incentives can help spur new approaches at the state and local level, including tolling and pricing, thereby fostering greater overall investment that will in turn allow federal dollars to go farther. Although other funding mechanisms undoubtedly are important at the state and local level, federal policy does not generally play a significant role |
• Expand the ability of states and localities to impose tolls on the Interstate System by allowing tolling of net new capacity. This recommendation builds on the currently enacted Interstate System Construction Toll Pilot Program and would remove the limit on the number of facilities that can take advantage of the program. In considering this and subsequent recommendations, and to ensure full adherence to the commerce clause of the Constitution, any potential adverse impacts on interstate commerce and local travel should be thoroughly analyzed and appropriately mitigated as a requirement for implementation.
• Allow tolling of existing Interstate capacity in large metropolitan areas (of 1 million or more in population) for congestion relief. This recommendation builds on the Express Lanes Demonstration Program, expands its potential applications, and removes some of the pilot requirements.
• Continue the Interstate Highway Reconstruction and Rehabilitation Pilot Program and expand it from three slots to five. This pilot program allows tolling of existing Interstate capacity for reconstruction and rehabilitation. If tolling the existing Interstate System is determined to be the appropriate solution by a particular state, this pilot program enables the state to use this option to help meet its funding gap. States that participate in the pilot program must ensure that there are appropriate protections for system users and interstate commerce.
• Support standardization of tolling and information systems by completing necessary rulemaking regarding electronic tolling and interoperability. A key role of the federal government is to spearhead the coordination that is required to ensure frictionless transitions throughout the system and to provide users with the information they need to make smart choices.
• Reauthorize the federal credit program for surface transportation (originally authorized by the Transportation Infrastructure Financing and Innovation Act of 1998 and now commonly referred to as TIFIA) with a larger volume of credit capacity, broadened scope, and greater flexibility. In conjunction with core credit assistance, authorize incentive grants to support and encourage the development and financing of user-backed projects. The Commission rec- ommends a total of $1 billion per year in budget authority for the following purposes:
Credit Assistance ($300 million in annual budget authority)—to fund core credit assistance. The Commission also recommends several programmatic refinements, including having greater flexibility to make credit commitments.
Pre-construction Feasibility Assessment Grants ($100 million in annual budget authority)— designed to address a key obstacle that states and localities face in advancing user feebacked projects. The program would provide funding (in the form of grants or "conditional loans" to be repaid when possible) for a portion of the costs that a state or local sponsor must incur to undertake early planning, feasibility studies, environmental clearance, and other development-stage activities. The Commission believes that such a program could create substantial leverage of limited federal assistance.
Capital Cost Gap Funding Grants ($600 million in annual budget authority)—to provide incentive grants to states to complement TIFIA credit assistance. Recognizing that there are many projects for which partial (but not 100 percent) funding through userbacked revenue streams is possible, this program would provide grant funding to help close a portion of the estimated gap between the amount of capital for construction that can be derived from future user fees and the amount necessary to complete and maintain the facility for its useful life. Such a program could help spur states and localities to seek to build more projects that rely at least in part on user-backed revenues, allowing federal funds to go farther since they would be supplemented by additional user-based revenues.
• Invest $500 million per year ($3 billion over a six-year authorization period) to re-capitalize State Infrastructure Banks (SIBs) and continue to allow states to use their federal program funds for this purpose as well. While the TIFIA program focuses on large projects of national and regional significance, there are similar opportunities for smaller projects that the SIB model is well positioned to serve. Providing this level of new capitalization funding could help support a wide range of smaller projects that have the potential to leverage user-backed payments and other new revenue streams but that lack access to capital markets on a cost-effective basis.
• Take actions to facilitate and encourage private-sector financial participation where this can play a valuable role in providing cost-effective and accelerated project delivery, and support user fee-based funding approaches to meet the country's capacity needs and, in particular, its urban congestion challenges. At the same time, ensure that appropriate governmental controls are in place to protect the public interest in all respects. Private capital can help deliver more projects and thus play a role in helping to address the investment gap. It should only be pursued, however, with appropriate protections for the public interest. These should include, above all else, ensuring appropriate maintenance of and access to privately operated facilities and requiring that any proceeds generated for state or local project sponsors be used for additional surface transportation investment within the state or relevant jurisdiction. Federal policy in this area should recognize the respective purviews of federal and state governments and should preserve and support the ability of state and local officials to impose appropriate restrictions on these arrangements. The federal government should support the development of Pest practice information to inform state and local efforts, including working with appropriate stakeholder and industry groups to develop guidelines for transparency and accountability for public-private partnerships.
• Expand the highway/intermodal Private Activity Bond (PAB) program from its current $15 billion national volume cap to $30 billion and limit the use of the program to projects that create net new capacity. Once the turmoil in the financial markets subsides, it is anticipated that the existing capacity of the PAB program will be consumed quickly. More states and local sponsors will be looking to take advantage of this mechanism to lower financing costs for projects with private-sector financial participation by making private provision of infrastructure eligible for the same exemption from federal taxation that state and local governments have for publicly provided infrastructure.
• Consider authorizing the issuance of tax credit bonds to support capital investments with public benefits.6 The Commission encourages Congress to consider the use of tax credit bond financing as an appropriate tool for surface transportation projects where the public benefits cannot be fully monetized by direct users or other beneficiaries and where traditional HTF revenue-based programs are inadequate. Examples of investments with broad national benefits that could potentially be strong candidates for this type of federal subsidy include intercity passenger rail and goods movement projects. Use of such tax incentives, however, should be carefully targeted to capital investments with clear public benefits.