October 1, 2014
This year has seen increased Congressional interest in freight and transportation, as several bills have been introduced recently in the U.S. House of Representatives, along with two other proposals for freight related bills in the U.S. Senate. Also, the House Transportation and Infrastructure Committee released a detailed report on public-private partnerships (P3s). This Policy Update has a brief overview of each bill, a summary of the findings from the report on P3s, and a discussion of their alignment with GO TO 2040.
In September 2014, the Economy in Motion: National Multimodal and Sustainable Freight Infrastructure Act was introduced in the U.S. House of Representatives. It essentially blends proposed freight funding programs from the Administration’sGROW AMERICA Act with proposed revenue sources from H.R. 3825, the Freight Infrastructure Reinvestment Act, introduced in the House in July 2014. Additionally, the Economy in Motion Act would build off of provisions in MAP-21 by establishing a national freight policy, a multimodal freight network, and a national freight strategic plan.
The Economy in Motion Act proposes a new Freight Transportation Infrastructure Fund to provide $8 billion equally split between competitive and formula programs. Revenue for the new freight fund would come from establishing a 1-percent tax on road and rail shipments to be paid by the shipper. The formula program would award $4 billion annually to states that have established a state freight advisory committee and have adopted a detailed freight plan. Additional formula funding would be awarded to states that coordinate their freight plans with at least one other state. The competitive program would award $4 billion annually to multimodal freight projects that improve the efficiency and reliability of freight movement. For example, eligible projects include improvements to road, rail, air, or water facilities; intermodal facilities; facilities located on a border crossing; or operational improvements.
In July 2014, H.R. 5101, the National Freight Network Trust Fund Act of 2014, was introduced in the U.S. House of Representatives. The bill aims to establish a National Freight Network Trust Fund (NFNTF) that would be funded by transferring 5 percent of import duties from the Harmonized Tariff Schedule of the United States into the Fund. The NFNTF would provide funding for a new National Freight Network Grant Program, which would award funds to projects that improve performance along the National Freight Network (NFN). Under MAP-21, U.S. DOT mustestablish an NFN to strategically direct resources to highway corridors most critical to freight. The bill redefines the NFN to include roads and rail lines that connect the NFN to a port, on-dock rail, projects in a state freight plan or regional transportation plan, high freight volume roads or rail corridors that provide connectivity to major freight destinations, and rail-highway grade separations.
Over the summer two other bills related to freight were proposed. In May 2014, S. 2380, the Freight Priorities Act, was introduced in the U.S. Senate. This bill would establish a National Freight Policy and a Multimodal Freight Network, propose performance measures for the network, and propose a pilot program to measure multimodal freight performance in five urbanized areas.
While text for a bill has not been released, the second proposal from the U.S. Senate outlines a plan for freight that would focus on a multimodal approach. That proposal would create a streamlined permitting process for multimodal freight projects, a requirement for states to develop freight plans and freight advisory committees, and an increase for funding of freight research at U.S. Department of Transportation (U.S. DOT). It also calls for targeting investment in multimodal freight projects at major bottlenecks, as well as first- and last-mile connectors on key trade corridors.
In January 2014, the House Transportation & Infrastructure Committee established a Panel on Public-Private Partnerships to evaluate the state of P3s, which provide a greater role for the private sector in the design, construction, financing, and operation of transportation facilities. In September 2014, the panel released its final report presenting the group’s findings and recommendations. The panel believes that P3s will be useful for satisfying a small share of national infrastructure needs and that the potential for P3s is limited in the U.S. compared to international markets. Additionally, the panel’s report stresses that P3s are a financing tool, not a funding mechanism.
Considering these findings, the panel made several recommendations, including:
· Improve public sector capacity and align policy goals. Because P3 deals are technically complex and differ from the traditional project delivery method, public agencies may not have the appropriate in-house expertise to evaluate proposals or manage projects. P3s are most successful when the policy goals of the public sector and the needs of the private sector are aligned.
· Ensure transparency and accountability. The agreements made between the public and private sector in P3 deals are long term and complex. Transparency in these agreements is critical to ensuring accountability and that the best interest of the public is secured. Accurate accounting of the costs and benefits must be available throughout the process, and analytical best practices should be expanded and utilized to achieve these goals.
Ultimately, the panel found that, for certain high-cost and technically complex projects, P3s can foster innovation and accelerate project delivery. However, the agreements made between the public and private sectors in P3 deals are long term and complex. Transparency in these agreements is critical to ensuring accountability and that the best interest of the public is secured.
The panel suggested that the full benefits of leveraging P3s will only be felt if the costs and benefits are fully understood and transparent, and if the agreement is well-structured to align the goals of the private sector with the needs of the public sector.
The various freight proposals described above are broadly consistent with CMAP’s policy positions. GO TO 2040 calls on the region to create a more efficient freight network, with an emphasis on improving federal policy, securing dedicated funding for freight, and steering resources to projects with the greatest impact. Additionally, CMAP recently convened a Regional Freight Leadership Task Force that provided recommendations to address institutional and funding barriers affecting the freight system in the Chicago region. In February 2014, CMAP and 12 other major MPOs co-signed a white paper that calls for the next federal transportation authorization to take a multimodal perspective on freight policy, provide at least $2 billion in annual funding for freight improvements, and incorporate regions into the investment decision-making process.
CMAP is also interested in innovative methods to fund or finance transportation projects, including P3s. More specifically, GO TO 2040 recommends “pursuing public-private partnerships as appropriate” and stresses that all P3 arrangements must be handled with a high degree of transparency and care. P3s have potential for substantial public benefit, but also public risk. CMAP supports a case-by-case approach to implementing P3s in the Chicago region. Each project should be studied for its own merits, bearing in mind the strengths and weaknesses of P3s as a contracting and financing strategy, as well as the overall need to protect the public interest.