Chamber Says U.S. Infrastructure Slowing Economic Growth; States Seek Funding Options

More evidence this week that renewed investment in the nation’s transportation system is needed--and soon: the U.S. Chamber of Commerce released their first-ever Transportation Performance Index, which shows that the performance of the system is not keeping pace with the rate of growth of demands on it. Meanwhile, two states got very different kinds of news about the challenges they face in upgrading that system.

The index reveals a significant decline over the last five years in how infrastructure is serving the needs of domestic commerce, international trade and the overall U.S. economy. And things could go from bad to worse in the coming years.

“From now through 2015 there will be a rapid decline in the performance of the system if we continue business as usual,” Chamber President and CEO Thomas Donohue told reporters Thursday in Washington. “Right now we’re on an unsustainable path.”

Moreover, the system’s performance is having a major impact on the economy at a time when it’s still struggling to recover from a debilitating recession.

“We’re leaving $1 trillion on the table in GDP by not getting the most bang for the buck out of our transportation system,” Donohue said. “If we don’t head off that decline, we’re taking money out of every American’s pocket.”

The index contains both national and state-by-state results. It combines 21 indicators of supply (which considers availability of transportation options and coverage), quality of service (which considers reliability and costs of disruption) and utilization (which indicates whether growth can be accommodated) across all modes of passenger and freight transportation including highway, public transportation, freight railroad, aviation, marine and intermodal in order to show how well the transportation system is serving the needs of businesses and the overall economy.

Although the national index improved slightly between 2007 and 2008 (the most recent year for which data is available), there was a clear downward trend from 2003 to 2008, the index indicates. In addition, over the period between 1990 and 2008, while the Transportation Performance Index increased about 6 percent overall, the U.S. population grew 22 percent, passenger travel grew 39 percent and freight traffic grew 27 percent.

“Given these facts, it is a testimony to business ingenuity that the national results are not worse,” the Chamber’s summary report read. “Businesses work around transportation challenges by scheduling deliveries in off-peak hours, implementing flexible employee work policies, and substituting information technology for transportation services. There are also countless stories of transportation infrastructure owners using the engineering equivalent of duct tape to hold infrastructure together and crafting creative operational strategies to enhance throughput.”

The Chamber said it will take a high level of new investment targeted at improving performance across all transportation modes and in all parts of the country in order to turn things around and support the 21st century economy.

“A change in any one indicator in any one location does little to move the index; however a 10% improvement in all indicators produces approximately a 20% increase in the index,” the report said.

As for the state-by-state results (which rely on 2007 data only), half the states have an index value of less than 60. According to the report, an examination of these states reveals that they experience “significant pressure in terms of population growth, high levels of development, and limited access to or aging infrastructure.”

The report concludes that Congress should get to work on passing a transportation reauthorization bill along with other legislation such as the Water Resources Development Act and the Freight Rail Infrastructure Capacity Expansion Act.

“When Congress and the administration take vacations from their responsibilities by extending laws instead of doing the tough work of finding solutions, the performance of the transportation system suffers,” the report said. “It’s time for them to get back to work and take on the three big questions: How to invest? How much? From what sources?”

Of course finding the money remains the major sticking point holding up infrastructure investment. State governments struggling to put money into their transportation systems might be wishing they had a problem like Virginia’s. That’s where Gov. Robert McDonnell announced Thursday that he expects to spend almost $1.5 billion over six years on transportation improvements after an audit of the state’s Department of Transportation found that hundreds of millions of dollars have been sitting unspent in various accounts for several years.

The audit found $654 million in unallocated federal money and $400 million in construction and maintenance accounts. McDonnell also hopes to receive $458 million if the legislature approves his plan to privatize the state’s liquor stores at a special session in November.

At a news conference Thursday in Richmond, McDonnell and Lt. Gov. Bill Bolling criticized former governor Tim Kaine (now the chairman of the Democratic National Committee) for closing 19 of the state’s 42 rest stops and trying to raise taxes while money was available to spend. State democratic leaders countered that Virginia Department of Transportation management was just being prudent and cautious during a period of financial uncertainty and as the agency was facing the loss of more than 1,000 employees (due to budget cuts) and the challenges of allocating American Recovery and Reinvestment Act dollars. (Coincidentally, a report released this week by the Government Accountability Office said that many states have been slower to obligate and expend regular federal highway formula funds this fiscal year because the obligation of ARRA funds has taken priority.)

The Virginia DOT audit makes more than 50 recommendations to improve the operations of the department, including:

  • Converting $400 million in credits that it receives from the federal government for maintaining toll roads into money it can use as state matches for federal projects in order to free up state money for other projects; and
  • Keeping only a 60-day state reserve for construction money instead of the five and a half month reserve the state currently keeps, which would free up $200 million for immediate use on projects.

The audit was the third of four this year for the department, which has undergone more than 50 over the past 30 years. The first audit, issued in May, recommended that the state create a government office to deal with public-private partnerships. The second, released last month, said more needs to be done to determine whether the work of the Virginia Transportation Research Council—which works with the University of Virginia and the Virginia Tech Transportation Institute to research, test and implement transportation improvements—is being applied.

Meanwhile, another state that like Virginia had a high profile gubernatorial contest last year, New Jersey, learned this week that it may have to consider turning to private companies to finance transportation projects as the state’s transportation trust fund runs out of money. Former U.S. Rep. Richard Zimmer, who chairs a panel studying the issue, told state lawmakers that the fund will be hard pressed next July when payments on $12 billion in outstanding debt consume its $895 million in annual revenue. Gov. Chris Christie has also said the state will have to consider halting work on a new Hudson River railroad tunnel to New York and move project funding to shore up the trust fund.

But Zimmer said the potential exists for the sale or lease of existing state transportation assets as well as utilizing public-private partnerships to build new infrastructure. According to a report presented to lawmakers, the state could save more than $42 million a year by hiring a private firm to handle toll collection on the New Jersey Turnpike and Garden State Parkway.

By the way, New Jersey ranked dead last among the 50 states in the U.S. Chamber’s Transportation Performance Index. But thinking about deals with the private sector might not be a bad idea. At his news conference Thursday, Chamber President Donohue said that in addition to passing reauthorization and other legislation, the federal government should also do more to encourage the private sector to invest in infrastructure.

“There is north of $180 billion in private capital just waiting to be invested if only we swept away regulatory roadblocks and encouraged its use,” Donohue said.