The America Fast Forward (AFF) Bond Program will appeal to a Congress concerned about the federal deficit and a Highway Trust Fund that is running on empty:

Congress will begin consideration of the next big transportation reauthorization bill in May or June, but concerns about the budget, the federal deficit, and the pending insolvency of the Highway Trust Fund will stand in the way of a robust transportation funding program. The Trust Fund, which is funded by the national gas tax and is the major source of federal transportation funding, has been depleted due to the greater fuel efficiency of cars, the fact that Americans are driving less, and because the gas tax was set at 18.4 cents per gallon in 1993 and does not rise with gas prices, and because it was not indexed to inflation. Whereas the gas tax represented 17 percent of the price of a gallon of gas in 1993, today it represents just 5 percent. The Trust Fund is projected to be running on empty in 2014 and has required transfusions of about $10 billion a year from the General Fund. This is not sustainable but neither does this Congress appear willing to increase the gas tax.

Financing strategies are easier to support than increased funding for grant programs because they require less money up front and leverage significantly more money from state and local governments and the private sector:

These federal financial constraints make all transportation funding requests more difficult but they make financing strategies particularly attractive because federal funding for transportation would leverage additional investment from state and local governments and private investors. A loan program, for example, can serve more applicants than a grant program because the principle is paid back, making the money available to more applicants. A bond program would allow state and local governments (such as LA Metro) to issue bonds secured by a revenue stream (such as the Measure R sales tax) that would be bought by private investors. The federal government’s role would be to provide these investors with federal income tax credits in lieu of interest payments. This enables the federal government to use a relatively small amount of funding — for the tax credits — to leverage significant additional investment from state or local governments and private investors. This makes the bond program appealing to both conservatives who want to stretch federal dollars and New Deal Democrats who want to invest in infrastructure.

The AFF bond program would enable LA County to complete its ambitious 30-10 Plan and to encourage similarly transformative transportation infrastructure improvements in other regions:

The bond program would provide LA Metro with the ability to complete Measure R funded projects now and pay back the principle over time using Measure R sales tax revenues. By providing state and local governments with this financing capacity the federal government would incentivize other regions to do what voters did in Los Angeles County — step up and vote to tax themselves to modernize their transportation systems by creating a revenue stream that can be used to secure financing. This allows the federal government to stretch federal dollars by leveraging additional investment at the state and local levels where in the aggregate there is significantly more money. The U.S. has fallen behind other countries in investing in infrastructure, especially China and India, which are investing aggressively in transportation. Now is the time to make these investments, while interest rates and construction costs are at historic lows and while unemployment remains stubbornly high in many states including California. The AFF bond program is estimated to create 500,000 private sector jobs nationally, and these are good jobs that can support families. Grant programs will remain an essential part of the federal transportation program, but in this time of federal budget constraints financing programs will be key to leveraging additional investment.

The proposed $45 billion AFF bond program will actually cost the federal government only $7.5 billion over ten years while attracting $100 billion in investment:

It is proposed that the bond program be authorized at $4.5 billion a year over 10 years for a total investment of $45 billion. This 10-year $45 billion program is projected to cost the federal government just $7.5 billion since the federal government is only providing tax credits in lieu of interest to investors, while state and local governments would pay back the principle. Since the bonds are only a part of the revenue stream that would be attracted to these investments, this financing program is expected to leverage transportation infrastructure investments worth about $100 billion over 10 years.

The AFF bond program is the third of three parts to the 30-10 Plan to accelerate LA County transit projects:

•  #1: Applications to the Federal Transit Administration’s New Starts funding program for grants for the Westside subway and the Regional Connector — which were recently recommended for funding in President Obama’s 2014 budget;

•   #2: Applications to the U.S. Department of Transportation’s recently expanded TIFIA low-interest loan program. California Senator Barbara Boxer, working with LA Mayor Antonio Villaraigosa and LA Metro, provided the leadership needed to increase funding for this program ten-fold — making TIFIA the largest transportation infrastructure financing fund in U.S. DOT history. LA Metro has applied for a loan.

•  #3: The proposed bond program. It should be noted that this bond program is unlike the bond program that President Obama is called “America Fast Forward” in so far as he is proposing an interest subsidy of only 35 percent, compared to the 100 percent subsidy that Los Angeles is requesting.

Policy precedents for the AFF bond program:

Congress has recently enacted similar tax subsidies for other sectors of the economy but not for large-scale transportation investments. Congress has enacted half a dozen tax credit bond programs since 1997 for purposes such as public education, disaster recovery, clean renewable energy, forestry conservation and energy conservation. These tax credit bonds provide federal buy-downs of 70 to 100 percent of the interest. Each program has a volume cap and maturity limitation.

How the bond program would be structured:

1)      This program would amend section 54 of the Internal Revenue Code to establish a new class of tax credit bonds specifically designed to stimulate greater investment in surface transportation infrastructure projects.
2)      It would authorize the issuance of $45 billion of AFF bonds by state and local governments over a 10-year period. It would be phased in over 10 years ($4.5 billion/ year) to meet the needs of multi-year capital programs, to incentivize states and local governments to create local transportation revenue sources (like Measure R in LA), and reduce the impact of the tax credits.
3)      The Secretary of Transportation would allocate a portion of the total volume cap to sponsors of “major transportation projects” that meet certain goals, such as providing significant regional and national benefits including mobility, safety, economic competitiveness, livability and environmental sustainability. The secretary would allocate the remaining volume cap to the states according to some equitable formula such as each state’s share of the national population.
4)      AFF bonds would be authorized to have a maximum maturity of 35 years, which is longer than other bonds and would therefore require a greater federal subsidy.

Why transportation investments require a special bond program:

While Congress has recently enacted similar tax subsidies for other sectors of the economy it has not done so for large-scale transportation investments such as LA’s transformational Measure R-funded “portfolio” of projects. Current tax law sets a maximum bond term of approximately 15-25 years, which limits the present value benefit of the federal subsidy to 50 percent of debt-financed project costs. However the long life of transportation improvements and the benefits that these investments (especially transit investments) engender above and beyond increased mobility —economic development, jobs, congestion relief and transportation efficiency, emission reductions, energy self-sufficiency, improved livability and safety — provide a strong argument for a longer bond maturity and higher subsidy. We are proposing a maximum maturity of 35 years.

 

Move LA is co-sponsoring AB 1002 by Assemblyman Richard Bloom, which would levy a $6 vehicle registration surcharge that would provide $180-$200 million a year to be distributed this way:
•  40% to transportation commissions and operators for transit operations and discounted transit passes for seniors, students, low-income youth, the disabled, and other populations;
•   50% to cities and counties for first-mile/last-mile bicycle and pedestrian infrastructure, complete streets and Safe Routes to School projects;
•   10% to metropolitan planning organizations for competitive grant programs to help cities and counties implement SB 375.

Why AB 1002 and why now? California residents are increasingly interested in taking transit, walking and biking — to save money, to lead more active and healthy lifestyles, to avoid traffic congestion, and/or because they are concerned about climate change and this country’s continued dependence on oil.

But local governments have limited resources to spend on transit operations, bike and pedestrian projects. Smaller, more local, less expensive bike and pedestrian projects don’t compete well against larger highway and transit projects in countywide or regionwide transportation funding programs. And funding transit operations has never been easy because it requires an ongoing and reliable revenue source, whereas capital programs to build projects only need a one-time infusion of revenue.

AB 1002 would create a dedicated, ongoing source of funding for both operations and bike/ped projects, providing Californians with alternatives to owning one or more cars.

The bill is first heard in the Assembly Transportation Committee on April 22. The author is first-term Assemblymember Richard Bloom, former mayor and councilmember in Santa Monica.

Several years ago Jeff Wood at the national nonprofit Reconnecting America started compiling and sending out news stories he thought would be of interest to colleagues, friends, other bloggers, planners and policy wonks. In the beginning most of the stories were about public transportation, then he added stories about urban planning and design, and development near public transportation. Then the mix was broadened to include a array of stories about cities and urban issues, the environment and ecology, and including research papers and reports, and he listed upcoming conference and events as well.

The audience kept getting bigger, the sources kept broadening, and the mix of topics kept getting richer as this country’s fascination with cities continued to grow. And he always included a quote of the day that reflected the thoughts of urban dwellers. Today, for example, from the Guardian UK: “Virtually no country has graduated to a high-income status without urbanizing, and urbanization rates above 70% are typically found in high-income countries.”

Why are we so fascinated with cities? In 1990 just 10 percent of the world’s population lived in cities but by 2008, the urban population had increased to more that 50 percent and it continues to grow. In the United States today 29 percent of the land mass is covered by cities, but almost 85 percent of the population lives in cities and 93 percent of the economic output is produced there.

Now Jeff has his own website that serves as an archives for this study of cities. And you can read it here. (Or, you can sign up and it’s delivered to your email box daily.)

President Obama's Fascal Year 2014 budget recommends that the Westside Subway and Regional Connector receive $130 million in New Starts funding — a down payment on a broader federal funding agreement of over $2 billion (for these two projects) that Metro hopes to conclude with the federal government by the end of this calendar year. LA Metro Federal Affairs Director Raffi Haig Hamparian says LA advocates have played a key role in securing funding for Metro's projects, citing the LA Area Chamber of Commerce's annual trips to Washington DC, several of which have been led by LA Mayor Antonio Villaraigosa, as one particularly helpful example.

Raffi says that with the funding recommended in the President's Budget LA Metro will effectively "double our historical receipt of federal New Starts funds. And after we secure our formal agreement for both projects later this year we should nearly triple ($200 million annually) our receipt of New Starts funding. That is a result to be proud of and a dividend of the strong partnership we have and continue to maintain with the L.A. Area Chamber and other key stakeholders in L.A. County."

"Here with your daily dose of infrastructure porn is XKCD's Randall Munroe, who's gone and rounded up all of North America's various subway systems and combined them into one big interconnected map," Robert Gonzalez blogs on io9.com.

Just makes you wonder: WHAT IF? There's more here including info on subway systems worldwide, etc.

Denny Zane was quoted in the LA Times on Sunday, noting that eight bills to reduce the voter threshold have been introduced into the state Legislature, and that five of the eight would reduce the threshold for transportation projects. The story was about an LA Times analysis showing that a minority of voters "living in a daisy chain of small, suburban and relatively upscale enclaves around the county's outer rim were largely responsible for last fall's razor thin defeat" of an extension of the Measure R transit tax. The story points out that regions such as the South Bay, with higher concentrations of staunchly anti-tax voters, played a decisive role in defeating the proposal, while urban core communities voted for the tax extension.

The story notes several senior politicians in LA — including LA Mayor Antonio Villaraigosa and LA County Supervisor Zev Yaroslavsky and both mayoral candidates Eric Garcetti and Wendy Greuel — Villaraigosa has said that he'll continue his campaign to accelerate LA's transt projects.

Read more in the LA Times.

The state agency building one of the largest infrastructure projects in state history has filed a lawsuit against anyone standing in its way. In "High-Speed Rail Authority v. All Persons Interested" the California High Speed Rail Authority is taking advantage of an obscure state law allowing state agencies to consolidate all potential lawsuits into a single case, after which no one is able to take legal action.

Many of the legal issues that could potentially derail the project's financing go back to the wording of the 2008 ballot measure that approved the projects, which called for a high speed rail train that would travel on its own tracks between San Francisco and LA in less than 2 hours and 40 minutes. In an effort to reduce the costs the agency has shifted toward a "blended" approach in which the high speed train would run at slower speeds on commuter rail tracks as it nears these cities.

Read more on the Huffington Post.

San Francisco is going to start enforcing its Commuter Benefits Ordinance, which requires businesses with 20 or more workers to offer one of three transit benefits: a pretax deduction of up to $245 per month for transit or vanpool expenses; transit subsidies valued at $74, the cost of a monthly Muni pass; or a vanpool from a worker's home to place of business. Steve Hymon notes on his Metro's The Source blog that LA has no such law but that Metro does have a variety of voluntary employer-sponsored transit passes that are worth checking out.

Read more in the San Francisco Examiner.

Move LA didn’t come back home with the America Fast Forward bond program in our back pocket – it’s a heavier lift than can be accomplished in one visit, though we believe winning support for the bond program is definitely do-able. But for the moment Congress is preoccupied with the budget: The Senate budget fully funds MAP-21 but the House has proposed cutting $555 million from highways and $117 million from the transit program – meaning that few, if any, New Starts projects can move forward.

And then there’s the looming insolvency of the Highway Trust Fund, which is projected to be virtually running on empty by 2014 due in part to the increased fuel efficiency of cars, the fact that people are driving less, and the fact that the gas tax hasn’t been increased since 1993, when it was fixed at 18.4 cents per gallon. At a meeting of the House Transportation and Infrastructure Committee last week AASHTO (the American Association of State Highway and Transportation Officials), said this means highway investments will have to be cut from about $41 billion to $6 billion and transit investments from $11 billion to $3 billion.

We can’t think of a better way to stretch scarce federal dollars than a financing program that would leverage private sector investment and local dollars for badly needed transportation projects. This is exactly what the America Fast Forward (AFF) program about: The Measure R sales tax for transportation investments approved by LA County voters in 2008 enables us to secure low-interest loans through the TIFIA program adopted by Congress last year. TIFIA was one of two financing strategies in the AFF program. The second part is the bond program, which would enable us to use the Measure R funding stream to secure tax credit bonds and only pay back the principle -- as the federal government would offer investors tax credits in lieu of interest payments.

Move LA also discussed with members of Congress the idea of replacing the federal gas tax with a federal sales tax on gas, an idea that has also been championed by AASHTO. We were told that this is one of the options on the table that will be considered -- here is a link to a fuller discussion of why we think this is a very good, if temporary, solution. House T&I Chair Bill Shuster (R-PA) has said that he believes that there is no apparent long-term solution and that we should be satisfied with a short-term solution for now.

And here is a link to all of the reasons that we believe the federal government needs to stretch federal dollars for transportation investments by becoming a smart lender and not just a big spender.