Federal funding commitment needed to make public-private partnerships work, groups say

The heads of two influential freight stakeholder trade groups said today the Trump administration's plan to fund massive infrastructure improvements through public-private sector partnerships can work only if private interests are confident a strong commitment from the federal government will help deliver an adequate return on their investments.

Bud Wright, executive director of the American Association of State Highway and Transportation Officials (AASHTO), and Kurt Nagle, president and CEO of the American Association of Port Authorities (AAPA), voiced cautious optimism that private capital will flow more freely under President-elect Trump, who plans to commit between $500 billion and $1 trillion to rebuild the nation's infrastructure, largely through partnerships between government and private industry. However, they said investors would first need to see sizable funding from the federal government before they loosen the purse strings.

"We do see private-sector involvement, but we need to see direct funding from the federal government," Wright said during a question-and-answer session with reporters.

A proven mechanism for revenue generation would be needed so investors can reap acceptable returns, the executives said. Virtually all road projects are paid for by motor -fuels taxes, but the levies have not been increased in 23 years. In addition, more fuel-efficient vehicles have resulted in lower fuel tax receipts. As a result, Congress has repeatedly shifted funds from the general treasury to keep the highway program solvent. AASHTO does not anticipate that a new administration and Congress will raise motor fuels taxes, at least in 2017.

The concept of public-private partnerships has been around for years. However, its progress has always been stalled by concerns over how a sustainable source of revenue would be generated to justify the private capital commitment. Lifting a ban on the tolling of existing interstate highways has been a frequently discussed idea, but it is a controversial issue that has left stakeholders divided.

The Obama administration has wanted to let states decide whether they want to toll the parts of the interstate that run within their boundaries, providing that the Secretary of Transportation approve any new tolling plans and that the funds from the new tolling be dedicated to repairing and rebuilding roadways.

The comments came as AASHTO and AAPA released their second annual survey on how states are responding to provisions of the 2015 federal transport spending law that authorized nearly $11 billion over five years in dedicated freight funds. Of that, $6.3 billion would be apportioned through the "National Highway Freight Program," under which states must develop a DOT-approved freight plan within two years of the bill's December 2015 passage. The balance comes from $4.5 billion in projects classified as having "highway and freight significance." However, only $500 million of that was allocated to multimodal projects of the kind that port and highway interests are interested in.

According to the survey, 71 percent of states were, as of mid-2016, working on projects that were in compliance with the law. About 57 percent of the states identified 6,202 freight projects that were in compliance. Slightly more than one-third of the states that were polled identified $259 billion in project costs, a number that will undoubtedly rise as more states compile figures.

In the first report, published last year, the groups said it would cost a minimum of $29 billion over the next decade to fund "seaport landside" projects—such as connections between ports and highway networks—to keep pace with rising freight volumes as population increases in metropolitan areas.

The groups called on Congress and the new administration to allocate more funds outside of the Highway Trust Fund—the traditional funding mechanism for project outlays—to support the multimodal freight network. It also urged the revival of an "Office of Multimodal Freight Transportation" within DOT to coordinate multimodal planning needs across the agency's various modal departments. The 2015 law required the creation of a National Multimodal Freight Policy.

In addition, AASHTO and AAPA said that a tax paid by U.S. importers on the declared value of merchandise, the proceeds of which are to be used for harbor channel maintenance, be protected from any further diversions into the general treasury and be dedicated to pay only for infrastructure improvements.