Vol. 15, No. 1; January/February 2004

News from the Legislative Front
True to its word, the House Transportation and Infrastructure Committee released its version of the proposed reauthorization legislation before adjourning for the rest of the year. The House committee bill (H.R. 3550) proposes a total of $375 billion in new funding over a six-year period (FY 2004-2009) - a 72 percent increase over TEA 21 funding level and a 52 percent increase over the funding level proposed in the Administration's SAFETEA bill.

The House bill is silent on how the measure would be financed, other than assuming a repeal of the 5.2 cent/gallon tax exemption for ethanol and a transfer to the Highway Trust Fund of the 2.5 cent/gallon tax on ethanol. The latest Treasury Department projections estimate Highway Trust Fund revenues for the FY2004-2009 reauthorization period at $187 billion. The ethanol-related provisions are estimated to generate a six-year total of $14.1 billion. This leaves a shortfall of $174 billion assuming the proposed House target of $375 billion, and a $110 billion shortfall assuming the proposed Senate target of $311 billion. It is no secret that the House transportation leaders, along with most transportation interest groups (including AASHTO and ARTBA), entertain the hope of convincing the tax-writing House Ways and Means Committee and congressional leaders to approve a 5.5 cent/gallon fuel tax increase plus indexing fuel taxes for inflation - measures that would largely close the funding gap. However, the chances of Congress enacting a fuel tax increase in an election year and over the strenuous objections of the White House, are pretty slim. Instead, the Administration is exploring revenue raising approaches that do not involve increasing or indexing the federal gasoline tax. According to unofficial sources, its initially proposed funding level of $247 billion could be raised as high as $270 billion, presumably by expanding the use of variable tolling (authorized in the Administration's SAFETEA proposal), making use of private activity bonds and employing other forms of innovative financing.

At his press conference unveiling the House Transportation Committee bill, Chairman Don Young said he intends to have a bill, complete with a revenue title, by March 15. However, given the differences that separate the House and Senate transportation committees and the reluctance of congressional leaders to approve a hike in the gas tax, many observers believe this deadline may slip. Indeed, unless Chairman Young is willing to compromise and accept lower funding limits, a longer-term extension of the current surface transportation authorization, past the November elections, cannot be ruled out.

Texas - Expediting Road Construction With Toll Financing
At a time when the need for new highway capacity greatly exceeds traditional sources of revenue, toll revenue financing is attracting increased attention. Issuing bonds secured by toll revenue gives state and local authorities the ability to accelerate road construction and undertake new projects that might otherwise take years to implement if they were to depend on funding from state and federal gasoline taxes. Nowhere is this philosophy more evident than in the state of Texas. The Texas legislature has declined to raise the gas tax. Instead, in June 2003, it passed landmark legislation (HB 3588) providing an arsenal of new financial tools that promise to vastly speed up transportation improvements. The new law authorizes a $3 billion bond issue to be used for highway improvement projects (subsequently ratified by a constitutional amendment in September 2003). It also provides additional authority to the Regional Mobility Authorities (RMAs) which are charged with constructing, maintaining and operating toll facilities on a regional basis. HB 3588 authorizes the RMAs to issue revenue bonds backed by tolls and to enter into comprehensive development agreements with private entities to design, construct and operate toll road facilities. The law also has introduced two innovative new features: it authorizes the Texas Transportation Commission to convert regular state highways to toll facilities and to transfer them to RMAs for operation and maintenance; and it provides for payment by Texas DOT of per-vehicle fees (called pass-through or"shadow" tolls) as reimbursement to RMAs for construction and maintenance of state highways or as compensation for the cost of maintaining toll facilities transferred to an RMA. In a recent action, the Commission, acting under its new authority, directed the Texas Transportation Department to establish guidelines to evaluate all highways "in any phase of development or construction" for potential tolling.

The Washington DC Region-HOT Lane Incubator
Two recent actions - one by a local political body, the other by the business community - promise to make the Washington metropolitan region a leading incubator for the HOT lane concept. In the first action, the Fairfax County Board of Supervisors has unanimously endorsed a proposal by Fluor Daniel to widen a portion of the Washington Beltway in Northern Virginia by adding four HOT lanes. While this is just the first step in a lengthy process of gaining approval for this $693 million project, the decision of the local elected officials, reflecting growing public support for the concept, is expected to greatly facilitate state and federal government approvals. The second action - the first of its kind in the nation - is a resolution by REGION, an influential group of private sector organizations, to support a HOT Lanes Network in Northern Virginia. The resolution urges Virginia's elected leaders to "direct, encourage, and provide necessary resources" to develop a HOT network utilizing Virginia's Public Private Transportation Act (PPTA) of 1995. The PPTA allows private entities to enter into agreements with state authorities to construct and operate transportation facilities with minimal public funding. Also warming up to HOT lanes is the administration of Maryland's Governor Robert L. Erlich. Transportation officials in Maryland have revived a study of HOT lanes cancelled by former governor Parris N. Glendening, and are considering adding HOT lanes in several transportation corridors. The case for HOT lanes in the Washington region was summarized by your editor in his remarks before the membership of the Greater Washington Board of Trade in early December.

Federal Fuel Economy Program Due for an Overhaul
The National Highway Traffic Safety Administration (NHTSA) has announced that it intends to consider broad changes in the Corporate Average Fuel Economy (CAFE) program - the first major reform of the CAFE regulation in its 25-year history. The proposed changes are not intended to affect the stringency of future fuel economy standards, but rather reform the basic structure of the CAFE program. The objective is to revamp the program in such a way as to "enhance overall fuel economy while protecting occupant safety and the economic vitality of the auto market" in the words of the agency announcement.

As a first step, the NHTSA has issued an Advance Notice of Proposed Rulemaking in which it seeks comments on alternative proposals to restructure the CAFE program. After the expiration of a 120-day comment period, the agency is expected to develop a specific proposal. After another comment period, the agency would issue a final rule amending the current CAFE regulation. The entire process is expected to take many months and may not be completed until the year 2005.

Preserving Mobility for Elderly Americans
When an 86-year-old driver plowed through a group of pedestrians at a farmers market in Santa Monica last July killing 10 and injuring dozens of others, he sparked a debate over the need for stricter regulation of older drivers. It is a sensitive issue, pitting the desire of older Americans to remain mobile and independent, against the public's need for safety on the roads. Unfortunately, there are no easy answers to this dilemma.

Understandably, most elderly people want to hold onto their cars and driver licenses as long as possible. Public attitudes toward the treatment of elderly drivers remain ambivalent, as the baby boomers confront the reality of their own elderly parents' mobility dilemma. There is widespread sentiment that it is unreasonable and unfair to expect elderly people to give up their cars since doing so would be tantamount to sentencing them to a life of dependency and isolation if not virtual imprisonment in their suburban or rural homes. "The privilege of driving should not be lightly denied to the elderly in a society built around the automobile" editorialized the New York Times. "In the absence of any foolproof system of weeding out dangerous drivers, society will have to rely on the elderly to recognize their own limitations and on family members to engage in a friendly conspiracy to take away their keys." (The New York Times, July 27, 2003).

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