Highway funding faces perfect storm

The slight, gradual rebound in projected 2011-12 concrete demand has given way to a nearly flat outlook for the period, after a downgraded forecast Portland Cement Association released late last month. Chief Economist Ed Sullivan attributed highway-funding legislation uncertainty in calling for a 0.6 percent 2011-12 cement consumption increase over a 2009-10 trough. A previous forecast that might have seen cement shipments this year and next combine for an 8–10 percent gain factored a 20 percent increase in federal highway funding, which PCA now sees will continue at its present level.

Will additional highway funding uncertainty cut 2013 market demand, which Sullivan sees bringing a 16.4 percent cement consumption increase from 2012?

The federal debt ceiling debate underscored a challenge for infrastructure investment proponents: Certain Congressmen who might otherwise be flexible on a highway bill tapping both Highway Trust Fund (HTF) and general revenues are now wise to constituents tracking Washington red ink by the trillions. The past two decades of [Transportation Efficiency/Equity Act] TEA-themed highway funding routines are meeting budget pressures of Tea Party-aligned voters.

Six years ago this month, President George W. Bush signed the SAFTEA highway bill, spanning the 2004–2009 fiscal years, at the Caterpillar Inc. plant near Aurora, Ill. It capped a string of temporary federal highway program funding extensions brought about partly because the president—aiming to align outlays and HTF fuel tax receipts—had proposed a six-year plan amounting to about $250 billion. It was no secret that SAFETEA, funding $286 billion through September 2009, would drain the HTF balance based on projected fuel tax receipts as the Bush administration began its second term. Transportation policy observers have since assessed how the current highway funding mechanism is obsolete when there is no feasible path to increasing the 18.4-cent/gallon federal fuel tax.

Former National Surface Transportation Policy and Revenue Study Commission Vice Chairman Jack Schenedorf and Elizabeth Bell, both of the Washington, D.C., law firm Covington & Burling LLP, have outlined in a Bureau of National Affairs policy paper two user fee alternatives to supplement the HTF. Their proposed Federal Interstate Fee would apply to all vehicles using the Interstate Highway System. Electronic, EZ Pass-modeled fee collection would support a special HTF account confined to Interstate repair and modernization work. An independent group, bound by Congressional directives addressing federal and state shares of Interstate work, would set the fee structure annually.

Schenedorf and Bell also propose a Federal Motor Carrier User Fee, applied to commercial trucks’ usage of all non-Interstate roads and collected through GPS-enabled tracking systems. Revenues would be deposited in a HTF account dedicated to freight-related improvements, with fee levels, like those for Interstate users, subject to Congressional oversight.

The Schenedorf and Bell proposal was announced with assistance from the Association of Equipment Manufacturers, whose members are keen to a diminished federal highway program given HTF constraints. The American Road and Transportation Builders Association, a leader alongside AEM in the federal transportation construction lobby, assessed further funding shortfalls in the wake of a late-July agreement between the Obama administration and 13 major automakers, whereby car and light-duty truck fuel economy will reach a 54.5 mpg average for the 2017–2025 model years.

Absent an upward adjustment in the federal gas tax, the agreement sets the stage for a $65 billion loss in HTF revenues over the eight-year period, an ARTBA analysis shows. May careful math guide any group setting Interstate and Federal Motor Carrier User Fees or similar mechanisms to augment a vital but insolvent trust fund.