Infrastructure Alert – January 29, 2013

The current International Longshoremen’s Association (ILA) and U.S. Maritime Alliance (USMX) contract extension expires at the end of February 6.  Carrier-paid container royalties remain the central issue in the negotiation.  Dockworker contracts were originally set to expire September 30, 2012, but have been renegotiated and extended on a short-term basis first until December 29, 2012, and now until February 6 as the two parties are struggling to come to a long-term agreement.  If the ILA and USMX fail to reach an agreement before the expiration deadline, the ILA could strike or the USMX could shut down its East and Gulf Coast ports.  Either decision would have an immediate, negative effect on the United States that would reverberate to most sectors of the economy.  The Obama administration has declined to comment on whether or not it would intervene given a port strike, instead urging the parties to resolve their negotiations as quickly as possible.  In 2002, facing a port strike, President George W. Bush ended a 10-day, 29-port lockout on the West Coast through the invocation of the Taft-Hartley Act.  President Barack Obama did not invoke Taft-Hartley in December during an eight-day strike at the Ports of Los Angeles and Long Beach. 

 

ON THE HILL

Yesterday the Senate passed a $50.5 billion disaster relief bill targeting relief to victims of Hurricane Sandy by a vote of 62-36.  The bill includes $5.4 billion for the Army Corps of Engineers, $10.9 billion for transit, $16 billion for the Department of Housing and Urban Development community development programs, and $11.5 billion for the Federal Emergency Management Agency (FEMA) Disaster Relief Fund. 

Before the vote, the Senate considered an amendment proposed by Sen. Mike Lee (R-Utah) that would have offset the bill with discretionary cuts, ensuring the bill would not add to the federal deficit.  Because funds in the bill are designated emergency spending, cost offsets were not required.  His amendment would have cut fiscal year 2013 discretionary appropriations by 0.49 percent and reduced discretionary spending caps for fiscal years 2014-2021.  The amendment failed on an essentially inverse vote to the bill, 35-62.

The $50.5 billion relief bill and the previously passed $9.7 billion law authorizing additional borrowing authority for the National Flood Insurance Program is roughly equivalent to the failed $60.4 billion relief package passed by the Senate in the 112th Congress.

The Sandy disaster relief funding, however, will be subject to the cuts of the sequester. The across-the-board cuts of budget sequestration, or the sequester, were delayed by the fiscal cliff deal and will go into effect on March 1, barring legislative action.  Even though more than 80 percent of the appropriations of the bill have been classified as emergency spending, the entirety of the relief bill’s appropriations are subject to a $2.5 billion cut through the sequester.  Much of the funding for transit programs, the Army Corps of Engineers, and Community Development Block Grants are not expected to be fully obligated by March 1 and may be especially hit hard.

Senators Claire McCaskill (D-Mo.) and Pat Toomey (R-Pa.) have reiterated their joint opposition to federal earmarks and will again seek a permanent ban on earmarks in the 113th Congress.  In the 112th Congress, McCaskill and Toomey’s bill, the Earmark Elimination Act of 2011, was never voted on.  McCaskill has stated she will pursue passage of the measure through the amendment process instead of as standalone legislation.  The practice of earmarking has been banned on a temporary basis since the 112th Congress.  Prior to the ban, earmarks were frequently used to fund infrastructure and transportation projects in members’ constituent districts or states, and critics of the earmark ban decry that loss of a funding source for local infrastructure projects.

The House Committee on Transportation and Infrastructure has officially announced its oversight plan, which details the focus areas of each subcommittee.  The committee has additionally announced all of its subcommittee chairs: Frank LoBiondo (R-N.J.) will chair the Subcommittee on Aviation,. Duncan Hunter (R-Calif.) will chair the Subcommittee on Coast Guard and Maritime Transportation, Lou Barletta (R-Pa.) will chair the Subcommittee on Economic Development, Public Buildings and Emergency Management, Tom Petri (R-Wis.) will chair the Subcommittee on Highways and Transit, Jeff Denham (R-Calif.) will chair the Subcommittee on Railroads, Pipelines and Hazardous Materials, and Bob Gibbs (R-Ohio) will chair the Subcommittee on Water Resources and Environment.

Notable amongst these is Rep. Denham, who has been an outspoken opponent of California’s high speed rail.  In the 112th Congress, Denham introduced an amendment that would have barred any federal funding for California’s high-speed rail.  The current rail authorization is set to expire this year, and Denham’s subcommittee will be in the middle of the debate and crafting policy for the reauthorization.

 

AT THE AGENCIES

Following its investigation of the battery fire on a Boeing 787 Dreamliner, the FAA issued an emergency directive and has officially grounded the Dreamliner.  Conflicting statements from members of Congress have not demonstrably indicated whether or not they will hold congressional hearings looking into the matter while the investigation is ongoing.  No timeline has emerged as to how or when the Dreamliner will be approved for commercial flights again.  The National Transportation Safety Board is continuing its investigation, but as it lacks regulatory authority, the FAA retains the sole authority to permit the Dreamliner to return to flight.

 

IN THE STATES

California:  On January 16, the Port of Los Angeles began its $137.7 million construction of the West Basin Railyard, a new intermodal storage rail yard that will connect with the national freight network, linking the Port of Los Angeles and the Alameda Corridor.  The rail yard will receive $16 million through a federal Transportation Investment Generating Economic Recovery (TIGER) grant and $51.2 million through a state Proposition 1B Trade Corridors Improvement Fund (TCIF) grant.  Breaking ground begins the Phase I of the two-phase project.  Phase I will construct the new rail yard, support tracks for terminals, and double-track connections to the Alameda Corridor and national rail network.  Phase II is projected to being in 2013, and will include final rail connections and catalyze truck and commuter traffic.

Illinois: The FAA has accepted a preliminary application and approved continued consideration by Chicago for the privatization of Midway International Airport.  Mayor Rahm Emmanuel has stated he is in the process of reviewing potential bidders for leasing Midway for as many as 40 years.

Maryland: Senate President Mike Miller is proposing an additional 3 percent sales tax on gasoline to combat the state’s transportation funding shortfall, which Miller estimates would generate more than $300 million per year for the governor’s roughly $700 million plan to replenish the Transportation Trust Fund.  The current Maryland gasoline tax is 23.5¢ per gallon.  In addition to the 3 percent increase, Miller’s plan includes provisions to allow local government officials to raise their jurisdiction’s gas tax by as much as 5¢ to fund their local transportation projects.  Miller is also considering introducing plans to lease the Intercounty Connector (ICC), the struggling $2.6 billion toll road, to a private operator as another method to increase revenue for transportation projects, particularly rail.  Miller cited the $3.8 billion lease of an Indiana toll road to international investors for 75 years as his inspiration to consider leasing the 18.8 mile ICC.  Moody’s chief economist, Mark Zandi, however, has warned the state against raising the gas tax, and instead waiting for the state economy to fully recover before implementing a higher gas tax.

Michigan: Governor Rick Snyder has announced  he will pursue $1.2 billion in a combination of higher gasoline taxes and vehicle registration fees to rebuild and sustain state infrastructure.  According to administration officials, the $1.2 billion target represents an additional $120 to be raised for each Michigan vehicle.  State legislators have floated having a referendum on May 7, asking voters to decide if the $1.2 billion will be raised via the governor’s gas tax and registration fee plan, or through an alternate increase in the state’s sales tax from 6 percent to 8 percent

New York: Last week, the New York State Thruway Authority approved issuing $500 million in short-term bonds to fund the $3.9 billion, three-mile Tappan Zee Bridge construction.  Despite the lack of a comprehensive financial plan for the project, the Thruway Authority has stressed that proper revenue will be raised through a combination of tolls and long-expected federal TIFIA financing.  The exact nature and amount of the TIFIA loan, however, has not been announced.  DOT is currently reviewing 27 TIFIA applications.

Pennsylvania: Governor Tom Corbett has announced he will pursue “uncapping” the wholesale gasoline tax, which is currently capped at $1.25 per gallon.  His administration estimates that uncapping the gas tax could raise $2 billion annually for the state, and go a long way towards ameliorating the commonwealth’s transportation funding problems. 

Virginia: Governor Bob McDonnell’s plan to eliminate the state gas tax and replace it with an increase in the state sales tax and a number of other measures, detailed in our last Infrastructure Alert.  State legislators have proposed at least eight alternative plans, and which, if any, of those will emerge to be a leading opponent against McDonnell’s plan has yet to be seen.  McDonnell’s plan has received a varied array support and criticism.  The anti-tax-increase group, Americans for Tax Reform, has declared the plan a tax increase and antithetical to the group’s pledge that the governor has taken, although he disagrees.

 

INFRASTRUCTURE ALERT EXTRA

As Congress and the states weigh their options in funding the vital infrastructure investments that both sides of the aisle agree are crucial to the United States, think tanks, interest groups, and various publications have turned their focus to funding the national infrastructure, particularly surface transportation.

Congressional Budget Office: Status of the Highway Trust Fund Under MAP-21 [Slideshow]

Tax Foundation: Gasoline Taxes and Tolls Pay for Only a Third of State and Local Road Spending

Building America’s Future: Transportation Infrastructure Report 2012

American Society of Civil Engineers: Failure to Act: The Impact of Current Infrastructure Investment on America’s Economic Future

Bloomberg Op-Ed: Want Better Roads? Kill the Gas Tax

The Transport Politic: The Federal Role in Surface Transportation Funding

USA Today: Time to Tweak Gas Taxes? States Weigh Options

Streetsblog: Confronted with Congested Pricing, People Clamor for Transit, Gas Tax

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Posted in Articles, earmarks, FEMA, gas tax, Highway Trust Fund, sequestration, TIFIA, Washington, D.C.

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