» Thanks to last year’s transportation authorization legislation and a lack of applications from transit authorities, aid from the TIFIA program is likely to be heavily biased towards roads projects.
In his State of the Union address on Tuesday, President Obama argued that federal transportation funding in the United States should follow a “fix-it-first” philosophy, where the rebuilding of roads and bridges (and presumably transit lines) with structural deficiencies is prioritized over the construction of new infrastructure. There is a lot to like about this idea: It would maximize the use of our existing resources, and it would ensure that the government isn’t sponsoring an expanded mobility infrastructure before our existing structures are up to date.
Everyone should be able to get behind this idea.
Yet the projects the Administration will begin financing through the TIFIA reduced-interest loan program are likely to take the opposite tact, for the most part supporting new construction over maintenance of the old. Of 28 projects that have submitted preliminary applications through the middle of last month for financing over the next two years, all but four are new construction or expansion of existing road, transit, or airport facilities. Moreover, road projects are likely to account for a large majority of infrastructure funded. Of the applications that have been received by the DOT, more than 70% are highway projects.
This is a troubling reflection of the state of federal transportation funding, for it suggests that there is still far too much funding going towards new roads construction, rather than renovations or public transportation infrastructure. It suggests that TIFIA — deemed an “innovative” federal infrastructure financing program — may simply replicate more of the same thinking about how to spend Washington’s money on transportation.
TIFIA provides three types of federal aid: secured loans, lines of credit, and loan guarantees, all of which are to be paid back over a long period by project sponsors, generally through user fees (especially for highways) or local sales taxes (especially for transit). In the past, the DOT has funded 27 projects through TIFIA, accounting for $9.2 billion in federally leveraged assistance and $36 billion in total spending by all authorities, including local and state financing.
The new 28 projects that have been submitted for aid over the next two years are from locations across the country and account for a wide variety of transportation — Chicago’s Riverwalk pedestrian way, Seattle’s East Link light rail line, and Houston’s Grand Parkway superhighway are a few notable examples. That said, most of the projects would produce new or expanded roads, and all — with the exception of a $1 million request from Southeastern tours — are sponsored by city, state, or regional governments or authorities.
We’ve known about this problem for months. MAP-21, the two-year transportation bill passed in June, provided for a major expansion of the TIFIA program (now sometimes known as “America Fast Forward”), offering $750 million in aid in fiscal year 2013 and $1 billion in 2014. Local or state (or private) project sponsors will be expected to cover a minimum of 51% of costs through other sources, but TIFIA can be used to leverage up to 49% of aid. In essence, the government expects to be able to use that $1.75 billion to produce a federal lending capacity of $17 billion and leverage a total of about $50 billion in funding for various projects around the country. So far, letters of interest and applications for $41.3 billion worth of projects — all from legitimate entities — have been submitted. The table below provides an overview of these proposed projects.
| Applicants for TIFIA Funding, as of January 17, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Source: FHWA |
Though the pre-MAP-21 TIFIA legislation provided specific guidelines that encouraged the selection of “innovative” transportation, MAP-21 effectively eliminated that criterion. Rather, in choosing the projects for financing, Congress mandated that the DOT is only supposed to consider whether the proposed project is eligible, whether its proponent is creditworthy, whether it would involve a public-private partnership, and whether construction contracting could begin within 90 days of application approval. All of the projects in the above list likely meet those criteria.
The result is that TIFIA has, in some ways, become a first-come, first-served program that is, according to analyst Phineas Baxandall, structurally skewed against public transit. The result is that projects like New York State’s proposed Tappan Zee Bridge Replacement — pictured at top — is likely to be approved for financing despite its questionable utility (this is particularly true because the project was selected by the White House in 2011 as a “priority” infrastructure project).
The other projects on the list, including most of the new highway projects, are likely to be approved by the DOT as well. There remains about $9 billion worth of projects that could be aided through TIFIA, but transit authorities do not appear to be rushing to get their projects on this list — and there is little that Washington can do to encourage them to. This should put in serious question the ability of the government to orient infrastructure funding towards renovation rather than new construction.
It would be incorrect to suggest that the previous guidelines made TIFIA a progressive transportation funder. Of projects that received commitments in the past, accounting for about $10.5 billion in aid, 77% of funds went to roads, most of which were new construction or expansion. One explanation for this preference is that TIFIA explicitly requires the financing of projects that have dedicated revenues associated with them; road projects with tolls on them offer this far more easily than transit projects that will almost definitely operate in the red throughout their useful lives and which require harder-to-get sales taxes to make the financing work.
The problematic skew of the TIFIA funding, however, is not the end of the story on transportation funding in the U.S. President Obama’s speech and related White House-released information suggests that the Administration wants the Congress to pass a new long-term transportation bill this year that, like previous Administration proposals, would significantly expand transportation funding through freed-up money available thanks to the end of the Afghanistan War. This would include a $50-billion up-front allocation to infrastructure, of which 80% would go to renovations of existing facilities. Past Obama Administration transportation budgets have proposed shifting funding significantly towards transit and rail, increasing their share from 22.9% currently to 35.7% over the course of five years.
The Congress and in particular its Republican members have been reluctant, however, to move forward with such new transportation budgets, in part because the “freed-up” money from the wars ending is an imaginary concept in an age of significant budget deficits. The result has been a series of bills that present little to no progress on changing the dynamics of transportation funding in this county, and MAP-21 was no exception. Yet 2013 is a new year, and when it comes to approaching the question of how best to invest in the nation’s infrastructure, you never know what compromises might be reached this time.
Image at top: Tappan Zee Bridge, from New York State
19 replies on “TIFIA Loans Likely Skewed Towards New Road Projects”
Has anyone figured out who attached the “enhancement” in MAP-21, that is, the addition of 60,000 miles of principal arterials, to the Federal Highway System? That really dilutes your funding and stretches your demand all at once.
So Tappan Zee will have been built TWICE without rail??? Might as well let it just fall and spend the money somewhere else.
We’re trying, we’re trying. But we have to stop that thug Cuomo from fracking upstate, and we have to stop him from looting the NYC Subway System any further, so stopping his gigantic pork-barrel waste of a Tappan Zee Bridge project is kind of third priority….
…God knows what other awful things Cuomo will try to do before he’s kicked out. He’s certainly been good at alienating Democrats.
IF they don’t rebuild the Tappan Zee, when it falls into the river, add a half hour to your trip from Ithaca to Manhattan. An hour wouldn’t be unusual.
Who in their right mind DRIVES from Ithaca to Manhattan? Then you have to PARK IN MANHATTAN.
The buses don’t take the Tappan Zee, either; they go through New Jersey.
Also, the Tappan Zee Bridge is at no risk of falling into the river. There’s been a lot of noise generated to try to confuse people about that.
(From where I am, the Tappan Zee bridge is useful primarily for trips to Connecticut.)
Years and years ago, in the early in the afternoon a propane truck started to leak while on the George Washington Bridge. They closed the bridge. Traffic backed up in Staten Island. Traffic backed up on the Newburgh Beacon Bridge. The Tappan Zee doesn’t carry as much traffic as the GW but closing it wouldn’t make it all evaporate either.
People who in New City who want to go to Tarrytown aren’t going to sit at home. The people in Stamford who get truck deliveries from Boonton are still going to expect their truck deliveries. As will the people in Suffern who get stuff from Bridgeport. It’ll get on one of the other bridges or tunnels. Traffic gets bad across the George Washington Bridge people switch to the Lincoln. Traffic gets bad at the Lincoln people switch to the Holland. Some of the trips that go across the TZ to get to JFK will shift to the Verrazano Narrows. Traffic gets worse in Staten Island if the TZ closes. Close the Tappan Zee and your bus ride on Fung Wah through the Holland Tunnel will be an hour longer.
Who in their right mind DRIVES from Ithaca to Manhattan?
Bus drivers.
I question whether any professional long-distance bus driver is in their right mind, but they do have to do it to get paid, certainly.
We have three separate bus services to NY: Shortline, Cornell’s private bus service, and a minimal Greyhound-branded service. They take three separate routes, but they all end up at the Lincoln Tunnel.
The buses from Upstate are already going at 10-15 mph for miles and miles and miles and miles through New Jersey.
The bus ride would NOT get an hour longer; it might be cancelled! The traffic through the Lincoln Tunnel is at the critical point already, where any extra delay causes people to stop driving.
I’m sure the trucks would have to keep going becuase the freight rail system in NYC is completely broken (when will the Port Authority get around to building the rail tunnel which it was commissioned to build, anyway?); the result would probably be legal restrictions on car traffic, in order to get the trucks through.
Car traffic would start to evaporate and people who absolutely have to travel would start to take trains instead.
Yeah, I’m sure it would make things worse in Staten Island and other *car-dependent* areas. But for the most part, the car traffic would SIMPLY VANISH.
This is what happens when you lose a link like this. Induced demand is real.
I suppose they could glue the loop side of the Velcro to the outside of the train and have people wear suits made of the hook side and get them into New York that way…
They don’t use Velcro, just hands and feet to brace the body and hang on but that’s pretty much how a great many people catch the commuter trains in and out of Mumbai and a few other cities in India.
But if you are busy clinging to the train with your hands you can’t swipe the touchscreen on your smartphone.
Priorities of-the-moment for most people tend to weigh more heavily toward avoidance of death or serious injury, but individual willingness for risk-taking spans a broad range across human cultures and classes, so perhaps the Velcro would be put to better use in temporarily attaching the smartphone to one’s forearm and swiping with the tongue.
“There aren’t enough trains” is an age-old argument.
Brace yourself for a shocking revelation: Supply of trains is not independent of demand. Metropolitan areas with more commuter rail demand than that of New York City have more trains.
The same goes for ferries. There is very little cross-Hudson ferry traffic, and nothing from Tarrytown to Nyack despite plenty of buses to Nyack, and Tarrytown station being next to the river – This was very different before the bridges, when ferries were a decent commercial proposition.
The Hudson Valley can quite easily have more trains and ferries. This is certainly true of passengers, and though transfers between mode are more complicated for freight, that follows the market too. the principal constraint right now is that they compete with cheap and abundant roads.
The Hudson Valley can quite easily have more trains
Yes it could. Unfortunately there isn’t much of a market for Nyack to Secaucus. Or Yonkers to Ossining. People want to cross the river and the rail links across the river are at capacity. Unless you want to go up to Selkirk.
No real surprise with the author’s belated realization at this TIFIA morph, well after the practice of earmarking had become overwhelmingly detested throughout the general public. There has been an ever-increasing lag in pushing money in volume through the standard Federal process for all the new-alignment, induced-development stimulus highway projects generated by local insiders across the country — typically sold to the local public as “congestion relief” or perhaps “economic development” solutions. The funding limitation and its concept-to-reality timeframe had become so lengthy by comparison with the golden years of the Federal-Aid Highway program during the postwar years that the entire structure of the development and construction industries which are reliant upon that program was at risk of political and economic failure.
The Federal-Aid program evolved over the previous century into a “build it and they will come” Ponzi scheme, one where the insiders were able to repeatedly syndicate and sell their previously-acquired land at every stage of some new highway’s evolution from concept to reality. Re-investing (i.e., recycling and laundering) some of the profits from increased land value could gain enhanced economic and political influence at local, state and national levels, and insiders pursued just that strategy through repeated strategic contributions in charitable organizations and supporting individuals’ campaigns for elective office or promoting debt-financed infrastructure that would enable actual development.
Projects in the conventional development pipeline (which had long been delayed in gaining environmental clearances over the past few decades) not only were not reducing local congestion levels (becoming intolerable for many areas’ citizens), but the insiders were financially stretched by covering the holding costs of real estate they had long since acquired that just happens to be ideally located with respect to the prospective new-alignment projects in accordance with the classic paradigm.
The conventional financing structure became constrained in recent decades from lack of adjustment in motor fuels tax rates and sharp increases in both construction and maintenance costs, but for awhile legislative earmarks provided a temporary mechanism by which specific Federal funding for specific projects could be placed into a priority position by force of political influence. As perception grew of earmarks attached to more and more expensive special-interest projects which consistently reflected limited prospective benefit for the general public, resistance to that mechanism rose sharply and reached a point where Congress was effectively forced by widespread public outrage to make a superficial policy statement that rejected the principle of earmarking entirely.
During the latest transportation bill’s creation, the declaration was made in a widely-promoted bipartisan media splash — all the while, the key members of Congress marking up the compromise bill were working to revise the existing TIFIA program as the legislative vehicle to break the funding logjam. TIFIA was recast into a program component which would provide maximum flexibility to local and state entities for project development and funding priority selection — one with substantially reduced requirements for regulation involving the general public or assessment of those same environmental and social issues which have bedeviled the insiders and their public- and private-sector cronies.
This regulatory relaxation was subsequently justified to the public as having become onerous and an inefficient set of mandates which only served to delay needed improvements and thus strongly contributed to the congestion and safety issues many people had long experienced. In reality, this was a deliberate campaign of propaganda and political misdirection to obscure and disguise the fundamental overhaul of enabling legislation in favor of the longstanding insider interests which have been the primary beneficiaries of that Federal-Aid Highway Ponzi scheme for much of the past century.
The fact that project nominees for the new TIFIA program, which reflect local sponsors’ most-immediate and highest priority selections, are new road projects shouldn’t come as a surprise, because that is exactly how the revised program was really designed to function.
The Chicago airport project would put an ATS (airport tram) station near the O’Hare Transfer station on the Metra North Central Service. The Metra station is on the opposite side of Mannheim Road from the airport and is now connected to the end of the ATS by airport remote-parking shuttle buses, so the airport project would benefit transit indirectly.
This boils down to the idea that roads are far more profitable in that in a lot of areas if you set up hot lanes with a toll or build a new toll bridge you can make far more money knowing that the existing traffic will pay to use it. While with rail projects a lot of them don’t exist or would be going into new areas so investors are more willing to exert their power to get new toll roads funded.