Update From Washington
on Infrastructure Investments

Despite widespread support in Washington for increased infrastructure investment, which should be good for the trucking industry and its customers, there are also threats to truckers and truck shippers.

By John Cutler

President Obama has now been inaugurated, and the new Administration is promoting a stimulus package in hopes of slowing, if not reversing, the decline of economic activity.  For supply chain professionals, the parts of the stimulus package dealing with increased funding for transportation infrastructure projects, and particularly for highway construction and maintenance, are most important.

The American Recovery and Reinvestment Act of 2009 was passed by the U.S. House of Representatives (as H.R.1) on January 28, 2009, and by the Senate on February 10 (as S.350).  However, the two bills are not identical, necessitating a House-Senate conference to develop a bill acceptable to the Congress as a whole.  The final bill, with stimulus funding totaling $790 billion, was approved on February 13, 2009 and signed into law February 17.

The legislation was controversial.  The Senate version attracted support from only three Republicans, and the House version got no Republican votes.  However, the most controversial aspects of these bills appear not to have involved funding for infrastructure.  Thanks to a widely publicized report by the Nation Surface Transportation Policy and Revenue Study Commission, set up by Congress in the 2005 Highway Bill, and thanks to efforts by shipper groups including NASSTRAC, the U.S. Chamber of Commerce, the American Trucking Associations, and the National Association of Manufacturers, government officials recognize the need for additional investment in the U.S. transportation infrastructure.

The stimulus package includes almost $30 billion for highways, of which at least 50 percent must be obligated, i.e., approved by the Federal Highway Administration, within 120 days.  There are additional amounts for transit and air transportation.

It is important to recognize that $30 billion for highways and bridges approved in the stimulus package represents only the first installment in highway infrastructure spending.  The current Highway Bill, known as SAFETEA-LU, expires September 30, 2009, and a new Highway Bill will be needed.

SAFETEA-LU included roughly $286 billion in infrastructure spending over several years, but that amount was plainly inadequate.  In fact, Congress needed to approve $8 billion in additional funding in 2008 to avoid insolvency in the Highway Trust Fund.  Current estimates are that the next Highway Bill may include $400 billion or more for the next five or six years, and that freight transportation will have a high priority.  If the last Highway Bill is any guide, Congress may not be able to have new legislation ready by the end of September, and may extend existing funding levels while new legislation is finalized.  The 2005 Highway Bill’s predecessor expired in 2003 but was extended several times.

Unlike stimulus package spending, which will come from general fund revenues, Highway Bill funding has traditionally come from fuel taxes.  However, falling fuel prices, more fuel-efficient automobiles, and reduced driving due to the recession have severely reduced the revenues available from fuel taxes.

Accordingly, there has been serious consideration of an increase in fuel taxes, which have not been increased since 1993.  The Policy and Revenue Study Commission’s 2008 Final Report included among its recommendations an increase of five to eight cents per gallon for each of the next few years, followed by transition to highway use taxes based on vehicle miles traveled (VMT).  Another study commission established by SAFETEA-LU, the National Surface Transportation Infrastructure Financing Commission, is reportedly considering recommending an increase of 10 cents per gallon in federal gasoline taxes, and 12 to 15 cents per gallon in diesel taxes, with the states being asked to implement increases in their fuel taxes.

Significantly increasing fuel taxes would have been a non-starter on Capitol Hill when gas cost $4 a gallon, but such an increase when the price is half that amount is more acceptable.  Any tax increase remains a long shot, particularly during a severe recession, but pitching higher fuel taxes as necessary to reduce congestion without imposing new or higher tolls throughout the national highway system might make some headway.

Despite widespread support in Washington for increased infrastructure investment, which should be good for the trucking industry and its customers, there are also threats to truckers and truck shippers.

Two bills that were not passed in the last session of Congress but are being reintroduced in the new session are the Safe Highways and Infrastructure Preservation Act (“SHIPA”) and the Trust in Reliable Understanding of Consumer Costs Act (“TRUCC” Act).  The former would undermine efforts to increase highway capacity.  Not only would it block any increase in truck sizes or weights, but it would expand the current “freeze” from interstate highways to all national highways in the U.S.  Numerous trucking and shipper groups are seeking relief from the freeze and permission to use 97,000 GVW trucks with an additional axle.

The TRUCC Act would force disclosure of fuel surcharge agreements and revenues, and would require payment to drivers of all amounts collected.  Lower fuel costs may help opponents of this legislation prevail.

Finally, the decision of the Federal Motor Carrier Safety Administration to retain current driver Hours of Service rules (which was supported by NASSTRAC) continues to draw fire from safety advocates, despite falling accident and fatality rates under those rules.  Public Citizen and other groups are reportedly considering lobbying Congress to overturn FMCSA’s decision, and they may file another court challenge.  These efforts, if successful, will also add to highway congestion by reducing trucking industry productivity.

Virtually all supply chain and logistics professionals stand to be affected by these developments, some of which will profoundly affect the U.S. transportation infrastructure, freight transportation pricing and available capacity.  LQ readers should stay current on these issues, and let your voices be heard.

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