Congress Finance Infrastructure

A Few Answers on the Public Works Bill

The House and Senate, and we’ve discussed in a recent post, has been considering a major infrastructure bill that would provide a massive new source of funds for improvements to the nation’s roads and railways. I asked a few questions to Jim Berard, Director of Communications for the House Transportation and Infrastructure Committee, which is headed up by Congressman Jim Oberstar. He also sent me a handy PDF of the letter sent yesterday by Oberstar and Representatives John Mica and Peter DeFazio to Henry Paulson and Ben Bernanke in reference to the recent AIG transit funding disaster. You’ll note that the final two pages of the document show all of the deals made by the nation’s transit agencies with AIG, summed up to a flabbergasting $16 billion; let’s just say that most of this nation’s public transit rail fleet appears to be owned by AIG and being leased back to transit authorities. I won’t blabber on again about why that’s such a bad idea…

Here’s the Q&A:

1. Have the specifics of the infrastructure/public works bill been laid out yet? How much of the proposal will be dedicated to transportation improvements? Of that, what percentage is dedicated to transit vs. roads?

“The final bill will be drawn up by Speaker Pelosi, based on recommendations of the various committees of jurisdiction.  We do not know the final dollar amount of the bill or how much of that total will be dedicated to infrastructure.  We can, however, use the stimulus bill passed by the House in late September, H.R. 7110, as a guide.  That bill provided $30 in infrastructure investment, of which $12.8 billion for highways and bridges and $4.6 billion for transit.”

2. Will the bill’s transportation component provide funding to states or directly to transportation agencies? Will the DOT be asked to evaluate and choose which projects to fund, or will Congress make those decisions in the bill itself?

“The funding for transportation infrastructure will be distributed to the states according to the same formula by which they currently receive revenue out of the Highway Trust Fund.  For transit, larger transit agencies will receive funding directly, smaller systems will get their funds through the state.

3. Will the transportation investments go towards new projects, or also be aimed for the renewal and renovation of current highways and transit systems?

It will be up to the states to determine which projects are funded.  If the new bill follows the same process set out in H.R. 7110, the states will be required to give priority to projects that can be started within 120 days.  These can be new construction or rehabilitation of current infrastructure.

4. Will there be aid to transit agencies designed to counteract the declining resources of state budgets and the problems due to those agencies’ involvement with AIG?

“We are very concerned about the effect AIG’s collapse is having on transit systems.  Our committee has sent a letter to the Treasury Secretary and the Federal Reserve Chairman asking them to step in and prevent action against transit agencies in this case.  (See attachment.) We will certainly monitor this situation closely and work with the Speaker to add legislative language to help these systems if such an approach is needed.”

Commuter Rail Philadelphia

Philly Fans Go Crazy

Philadelphia hasn’t won a baseball World Series in 25 years. So last night, what did the fans do to celebrate their achievement against the Devil Rays? Destroy a SEPTA bus shelter. A video of the moment was duly recorded by

Today, people in Philadelphia are so happy about the event that they have completely overwhelmed SEPTA and PATCO commuter trains into downtown. Philadelphia, which does have a pretty extensive train network, has been truly awful at maintaining and updating its system, so perhaps it is no surprise. Perhaps people knocked down that bus shelter because they were so horrified by the service SEPTA was providing them?

In other news, a summary of the Honolulu transit system EIS has been released. Here is a PDF, courtesy of the Star Bulletin. Current projections show a 20% decrease in traffic downtown and a $200 million increase in price over 2006 estimates, to $3.9 billion for the 20-mile route. Opponents are crying foul on the release of only the short summary, claiming that Mayoral candidate Mufi Hannemann is trying to prevent the people from knowing “the truth” about the project. They want the voters to reject the light rail proposition on Tuesday and vote for Mr. Hannemann’s rival, Ann Kobayashi, instead.

The AP discusses the rise in prominence of rail on the agenda of the U.S. Government.

High-Speed Rail Infrastructure President

Obama on Infrastructure; HSR Projects in UK and CA under Threat

Last night, Rachel Maddow spoke to Senator Barack Obama on MSNBC. The discussion turned almost immediately to infrustructure spending, though the two also talked about Afganistan and other not-as-interesting topics. You can watch the entire interview over at the Huffington Post, but I’ve transcribed the relevant stuff here:

Rachel Maddow: “There may be some policy fights ahead… if we are looking at economic stimulus, is there a possibility that you can see in your first term if you are elected, that we’d need an economic stimulus program that felt to Americans a little bit like a public works program, a little bit like an FDR-style infrastructure building program.”

Barack Obama: “Well I’ve actually talked about this, and I haven’t been hiding the ball on this; I think we have to rebuild our infrastructure. I mean, you look at what China’s doing right now, their trains are faster than us, their ports are better than us. They are preparing for a very competitive 21-st century economy, and we’re not. You know, one of the most frustrating things over the last eight years has been the ability of George Bush to pile up debt and huge deficits and not have anything to show for it, right? So if you’re going to run deficit spending, then it better be in rebuilding our roads, our bridges, our sewer lines, our water systems, laying broadband lines. One of the most important infrastructure projects that we need is a whole new electricity grid because if we’re going to be serious about renewable energy, I want to be able to get wind power from North Dakota to population centers like Chicago. And we’re going to have to have a smart grid if we’re going to have plug-in hybrids, then we want to be able to have ordinary consumers sell back the energy that’s produced by those car batteries back into the grid. That can create five million new jobs, just in new energy, but it’s huge projects that generally speaking you’re not going to have private enterprise want to take all those risks and we’re going to have to be involved in that process.”

Mr. Obama’s opinion on this issue couldn’t be clearer. As we noted yesterday, Democrats in the House and Senate are pushing forward on a massive $100-300 billion infrastructure, and Mr. Obama’s comments on this issue imply that he will push ahead, working to rebuild the nation’s physical plant. His specific note on the speed of Chinese trains implies that, as he’s said in the past, building a high-speed rail network is a major part of his program. Note that the remaking of the power grid that he discusses would be necessary to provide the power for such a system.

But in California, the likely first recipient of such a high-speed rail investment, speculation about voter fears on Prop 1a is rising. In an article in the L.A. Daily News, a pollster from the Field Organization argued that Californians have traditionally voted down large spending bills during recessions, and we most certainly are in the thick of one right now. A Bloomberg News article noted that private polling is suggesting that the measure is facing declining support as the economy continues into its downward spiral. Will this mean that Californians vote down this huge and important project? And will they also decide not to vote for Measure R in Los Angeles, which would raise the sales tax by half a percent to radically improve transit provision in that County? Five more days ’till we find out…

Meanwhile, the fight continues in England about whether to provide an HSR link between London, Birmingham, and Manchester, or whether to invest in a third runway for Heathrow airport. Read commentary in the Financial Times by the Tory Shadow Transport Minister Theresa Villiers here (pro-HSR), and by the Labor Transport Minister Geoff Hoon here (pro-airport expansion).

Finance Infrastructure

Update: Public Works Investments

I missed this in this morning’s post: looks like Speaker of the House Nancy Pelosi, looking to find alternatives to the current crisis in funding for infrastructure projects that we’ve discussed several times here, will propose next month a $100-$300 billion bill to pay for such a program. Senator Barbara Boxer, head of the Senate’s Committee on Environment and Public Works, similarly is looking to provide funding for such a program. This is excellent news and proves that Democratic leadership is looking for an effective antidote to not only the current economic crisis but also the overall infrastructure problems currently facing the country. For the first time since the Eisenhower Interstate Program, we are talking about massive investment to improve this country’s mobility and communication.

Some economists, notably those from the anti-investment league of the Bush Administration, say that infrastructure projects are too slow to provide an effective antidote to the mounting recession. As a result, as we also recently documented, the Bush Administration has abandoned the idea that the federal government should invest in infrastructure and significantly reduced funding as a percentage of GDP from the Clinton years. (Note: China invests 8% of GDP in infrastructure projects; we invest around 2%.)

Nonetheless, Congressman Jim Oberstar, head of the House’s Committee on Transportation and Infrastructure, defended the idea of infrastructure investment, claiming rightfully that these projects not only do produce jobs, but also provide incalculable improvements to the nation’s physical plant, essential for the economy to function effectively. As the New York Times story notes, $18 billion worth of highway projects are ready to begin construction in 90-days; the same can be said of $8 billion worth of transit projects.

Oberstar is correct in his evaluation of our nation’s current situation. We must invest in infrastructure if we intend for the nation’s roads and railways to survive the next fifty years. Congratulations to Congress for finally getting its act together! Let’s have a collective (if premature) sigh of relief for stressed and underfunded transit agencies! If Obama wins, expect passage in late November or early December in the Democratic-controlled House and Senate. We’ll see if lame-duck President Bush can pull it together enough not to veto.


Statement from Senator Barbara Boxer

Statement from Congressman Jim Oberstar

Finance Infrastructure New York

Will the Second Avenue Subway be Cancelled Once Again?

The Second Avenue Subway has been planned and replanned in New York City at least four times. Each time, the city’s subway planners announced that they would be able to commence construction, but ultimately were forced to delay and then cancel the project because of a lack of money and economic recessions. In the 1970s, the Transit Authority built a number of track sections for the line, tunnelling from 99th to 105th streets and from 110th to 119th streets. But then the city came incredibly close to declaring bankruptcy, President Gerald Ford metaphorically told the city to “Drop Dead,” and the Municipal Assistance Corporation, taking control of the city’s budget and run by the banks, cut off all spending on non-essential services, and some essential ones too (like funding for hospitals and police). Suffice it to say construction stopped.

But expanding subway ridership in the 1990s and 2000s, which now makes subway ridership the highest it’s been since WWII, forced the city to once again consider a second line on the East Side of Manhattan. The Lexington Avenue Line (the 4, 5, and 6 green lines for you novices) is hopelessly overcrowded, with far more ridership than the entire Washington, D.C. Metro system. And much of the eastern edges of the island are simply not well served considering their extreme densities. So the Metropolitan Transportation Authority (MTA) began construction in 2007 on the new line, the first phase of which will run as an extension of the Broadway Q Line from 63rd to 96th street, with intermediary stations at 72nd and 86th streets. This tiny 1.7-mile line, to open in 2015, will carry 200,000 people a day – more than just about any rapid transit line in the U.S. outside of New York.

Here’s the important point: though 1.7 miles is nothing for a transportation project, there’s enough work to be done in the next seven years that any significant delay in funding will not only push the project back (this has already happened; the line was supposed to be finished in 2012 originally), but it will eventually force the project to go into hibernation; in other words, it will be cancelled. The other sections of the line, which is supposed to extend up to 125th street and down to Whitehall street in lower Manhattan, might as well be cancelled today.

I don’t want to start digging the grave for the line yet because it has received billions of dollars of funding from the U.S. FTA and will be the recipient of $500 million from a New York State transportation bond that one approval from voters back in 2005. After all, earlier this year, the CEO of the MTA, Lee Sander, announced that the MTA would be pursuing a massive expansion – including new extensions in Brooklyn, Queens and the Bronx, as well as a Triboro line that would avoid Manhattan altogether. Shouldn’t the Second Avenue Subway just be the beginning of great new services for the city?

If only the answer could be yes. But the MTA’s funding is provided by three sources: fares, a .375% sales tax, and a real estate transfer tax (thanks Transit Blogger). Fare revenue is unlikely to go down because ridership seems to be increasing or at least staying steady, according to Second Avenue Sagas – New Yorkers seem positively giddy about their subway system, even during an economic crisis. But the failure of the economy in the last month – especially its financial sector – is going to hurt New York more than any other city (other than perhaps Charlotte). The real estate market, which has remade New York in past decade, is going way down, and the revenues dedicated to the MTA will follow. The state expects housing prices to decline every month for the next 15. Sales tax revenues will likely follow the same path, considering the growing shortage of bonus-laden investment bankers.

The MTA is now revising its budget estimates and envisioning not a $900 million deficit, but something three or four times larger instead. Times are tough for the agency, and unless suddenly there’s a huge infusion of cash from some foreign investor, service is going to have to be cut. But service can’t be cut, because ridership is at record levels. Trains are already crowded on almost every line in the system. So what can the agency do? I suggest to you that there may be no choice but to cut the Second Avenue Subway from the budget. There will be no massive expansion during a period of economic downfall.

The irony of this situation – one that is being duplicated in cities across the country – escapes no one. We have high transit ridership, and yet we can’t fund the services. And decreased transit services – espcially in dependent cities like New York – are likely to only make the economy worse off. Putting the city’s eight million inhabitants in a bind everytime they want to get around is going to discourage them from getting around. An economic crisis that is already tearing the city apart will be extended.

Of course, there are alternatives; the MTA could be provided more money from the city, state, or federal governments. The city can’t give away anything, though: though Mayor Michael Bloomberg may be exaggerating current problems, there’s little doubt that future budgets will see massive, multi-billion-dollar deficits. Meanwhile, the state’s projected budget deficit for the next three and a half years is now projected at an astonishing $47 billion. The idea that the state of New York would give more, not less money to the MTA considering this problem is laughable. So what is the MTA to do?

New York Governor David Paterson, along with New Jersey Governor Jon Corzine and South Carolina Governor Mark Sanford, are doing the right thing in pleading their case to Washington. New York is certainly not alone in facing budget problems – California, it might be argued, is worse off. There is absolutely no excuse for the federal government to give away $700 billion to failing financial companies just as states and cities across the country face cuts that will doom the provision of absolutely necessary services like transportation. The U.S. Government has far greater capacity to take on debts than states or cities do.

As I argued a few posts ago, the federal government has a very important role to play in funding the renovation and expansion of existing transit systems. If financial services corporations can expect a massive bailout, transit agencies, which, unlike those corporations, haven’t done anything wrong or been motivated by profit, certainly should expect the same. It’s time for a change in priorities in Washington. If not, we can expect, once again, that the Second Avenue Subway will be a figment of our imaginations.