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Cultivating Creative Leadership, Framing Emerging Issues

New York Public Transportation AssociationAlbany, New York

A Global Perspective on Public Transit’sCurrent State of Affairs

Steve Van Beek, President/CEOEno Transportation FoundationNovember 17, 2010

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DEFICIT COMMISSION CO-CHAIRS RECOMMEND25 cent gas tax increase

(10 cents for deficit reduction, 15 cents for transportation)

Today’s Headline

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Today’s Agenda

1. Introduction: CTL (Transit Executive Seminar) and Policy

2. Policy and the Economy: A Pivot Point for Public Transportation?

3. Surface Transportation and Funding: Making the Books Balance and Funding Policy Change

4. Climate Change and Greenhouse Gas Emissions: Transportation’s Burden and Opportunities

5. Creating the Sustainable Transportation Era: The Policy and Politics of Reform

6. Comments and Questions

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Policy and the Economy

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Why Policy? Because the transportation business will look dramatically different in 3-5 years.

• Public transportation is impacted by decision-making at all levels of government.

• We are in a dynamic policy environment.

• What we think of as roles for the public and private sectors, as well as for the “market” are changing (and need to change).

• Concerns over the climate and energy security have brought potential advocates and adversaries into our policy-making circles.

• Current policies with the budget, transportation, climate, and energy are unsustainable and policymakers know it.

• Agencies that incorporate these trends into their strategic visions and prepare for the transformations are more likely to be successful.

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An Overview of the Economy and Transportation Policy: November 2010

1. State of the Economy: Weak labor market, low inflation pressures and modest GNP growth of 2.0% in 3Q 2010. Reduced demand for transportation services has resulted in lower trust fund receipts to support USDOT highway, transit and aviation programs.

2. Transportation Services: Marginal growth after fall-off of demand from recession. After cost-cutting and consolidation, companies poised for profitability and modest growth in rail, aviation, and manufacturing (e.g., autos).

3. Public Investment, Short- vs. Long-Term: Economic Recovery spending through FY2011 is generating jobs and is addressing some infrastructure needs. Currently with aviation, and beginning in FY2012 for surface transportation, there is no codified long-term approach for infrastructure spending nor adequate resources to fund projects. Compounding the issue, as a whole states and localities are pulling back on spending, including for transportation.

4. Politics and Transportation: Despite historic bipartisan support for transportation spending, recent opposition to transportation provisions in Economic Recovery and the indiscriminate aversion to increasing taxes or user fees heighten uncertainty about the future of policy.

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Enduring and Current Issues with Transportation Economics and Policy

• The Case for Transportation Infrastructure: Sound investments will result in increases in productivity, national wealth, passenger and freight mobility, as well as reductions in negative externalities (e.g., congestion, GHG emissions) Together, they justify investment. In contrast, by itself, private capital is risk averse; benefits are often dispersed and marginal to individual firms and users; and private concerns lack the incentive to invest in projects that provide public benefits.

• Funding: Forecasts show that current surface and aviation trust funds will generate insufficient revenues to pay for current and projected needs. Amtrak, federal rail programs and TIGER (intermodal discretionary grants) lack dedicated funding sources. Prospects for “Economic Recovery Act”-style general fund infusions are dim.

• Policy Priorities: USDOT programs have been built modally and federally. While many projects are sound, national priorities and users whose interests cross political jurisdictions are disadvantaged in the funding allocation process. Most analysts agree that a “rebalancing” of the federal program is required to meet national goals and further user interests.

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Obama Administration Transportation-related Priorities:Two Years In, A Clear Picture Emerges

1. Prioritizing public transportation and livability (mass transit, rail)

2. Advocating for non-traditional transport investments (pedestrian, bike, freight)

3. Revaluating USDOT’s safety mission (“one level of safety” for transit and airlines)

4. Creating multimodal, discretionary programs(merit-based, e.g., TIGER 1/2)

5. Committing to policies counteracting climate change (Copenhagen, cap and trade, EPA)

6. Working on a National Energy Policy (shift from fossil fuels to cleaner energy sources)

7. Supporting organized labor issues (Project Labor Agreements, Davis-Bacon, Buy America)

8. Skeptical about value of trust funds(what will be their long-term approach to infrastructure spending?)

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The 112th Congress: A Changed Political Landscape for Transportation Policy

1. A New House of Representatives (Republican Majority)

2. No Jim Oberstar (Democratic Chairman House T&I)

3. Tax/Revenue Increases Extremely Challenging(Relationship to Transportation Funding)

4. Yes, Even Tougher to Get Senate Business Done (60 Votes)

5. The Shrinking Ideological Middle (Party Caucuses More Uniform)

6. Fewer Votes for Transit/Rail/Public Transportation (House Democrats, typically the biggest supporters, in minority)

7. Less Labor Support(House Majority Means Pro-Labor legislation is dead)

8. Climate Policy Very Challenging(Republican/Conservative Skepticism –Energy Policy?)

Will there be an effort by the two branches to find the center (where deals are cut)—or will politics shift immediately to 2012?

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Surface Transportation and Funding

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Key Variables for Long-Term Surface Authorization

• Status Quo or Fundamental Reform (Reauthorization or Authorization?): Will Congress tackle the policy architecture of surface policy (i.e., donee vs. donor, formulaic nature of program and earmarking) and design a performance-oriented program?

• “Show Me the Money:” New taxes and/or user fees required to continue or expand program. Timing of economic recovery and job loss appear to be key variables.

• Federal and Regional Planning Relationships: Widely recognized as inadequate for major capital projects and not inclusive enough for multiple transportation and non-transportation priorities.

• Incorporation with Environment/Energy Demands: Early Administration priority to new vehicle standards (CAFE) and cap-and-trade legislation evident but so far little integration between these policies and the transportation industry’s contributions to greenhouse gas emissions (GHGs).

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U.S. Fiscal Policy: Balance of Payments 2001-2015 (Treasury)September, OMB Mid-Session Review

The U.S. federal deficit has ballooned as tax receipts have slowed and the government has increased spending significantly. Eventually, pressures to reduce the deficit will impact transportation spending and policy.

Fiscal Year 2011 Projections

$1.5 trillion

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ARRA General Fund Spending: Highways and Transit (CBO)

A large share of ARRA investments will roll out over the second half of FY2010 and FY2011.

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Surface Transportation Funding: Balances in Highway and Mass Transit Accounts (In $Billions), Courtesy: AASHTO/CBO

Structural issues as well as the recession have created a crisis in the Highway Trust Fund. Despite infusions of nearly $30 billion, the Highway and Mass Transit Accounts face insolvency in 2012 & 2013.

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Surface Transportation and Long-Term Funding:Infrastructure Needs Far Exceed Resources (NCF)

National Chamber Foundation, “Future Highway and Public Transportation Financing”(available at http://www.uschamber.com)

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Transportation Programs: Options for Future Funding

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Revenue

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Options for Addressing ?

1.Increase fuel and excise taxes

2.Institute user fees either in addition to taxes or as a new source of revenue better aligned with use

3.Cut projected programs

4.Take advantage of non-federal options (e.g., state fuel taxes, PFC)

5.Adopt some combination

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President’s Bipartisan Fiscal CommissionReport Due December 1, 2010

“The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015.”

– Three working groups: Discretionary, Mandatory and Tax Reform

The CoChairs Proposal to raise the gas tax one cent for the next 25 months has put the issue back on the table. They did so under the rationale that the HTF has required over $30 billion of general fund monies to make it solvent.

Using 15 cents toward transportation programs would alleviate the need for taxpayers to again underwrite the deficiencies of the HTF.

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Prospects for Congressional Appropriations:The Playing Field is Getting Tougher

Overall Budget

• Concerns about annual deficits and accumulated national debt.

• Obama’s 3-year non-defense, non-homeland security, domestic discretionary spending freeze and the Deficit Commission’s recommendations to make spending caps harder to evade.

• Revised budget rules require offsets

THUD Appropriations Subcommittee

• No trust fund fixes on the horizon/replenishing Highway Trust Fund

• New transportation priorities of high-speed rail, intermodal discretionary grants, and livability all lack trust fund revenues and will draw from appropriations.

• FAA’s expanded requirements (including NextGen)

The THUD Appropriations Subcommittee will increasingly become a funding MMA-style “cage match” between competing transportation interests, fighting over an increasingly constrained allocation.

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Climate Change and Greenhouse Gas Emissions

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CO2 Contributions by End-Use Economic Sector (2008, U.S. EPA)

U.S. GHG emissions declined 2.9% between 2007 & 2008, reflecting an increase in the price of fuels and a drop in demand. Between 1990 and 2008 overall GHG emissions rose 14%, with transportation at 22%.

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The chart shows the modal breakdown of emissions—

includes domestic transport only.

Under the Kyoto Protocol, international

emissions are bunkered and handled by the IMO (maritime)

& ICAO (aviation).

Climate Change: Sources of U.S. TransportationGHG Emissions (CO2 Eq.), U.S. EPA (2008 data)

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Potential U.S. Policy Approaches to Address GHG Emissions

• Supporting research (e.g., fuels)

• Inventorying lifecycle GHG emissions

• Adopting inclusive planning

• Aligning funding programs and tax incentives with planning criteria

• Using revenue collection to incentivize:

• Raise gas/fuels tax

• Congestion Pricing/non-weight based

• Migrate to “Green VMT”/User Fees

• Adopting GHG national target(s)

• Taxing carbon and/or

• Allocating emissions (cap and trade)

• Use revenues generated to fund industry conversion

Easier

Harder

Politics

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Creating the Sustainable Transportation Era

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The Modal Era: No National “Policy”Disjointed and Incrementally Built

Modal focusWalled-off Trust FundsFormulaicFunding currenciesDivided governanceSupply centered

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A Performance-Based Intermodal System:An Alternative Model for Transportation Policy Architecture

What mix of modes is best for moving people and goods? What planning mechanisms can address

these multimodally?

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The Transportation Policy Future: A Sustainable Era?

Co-modality: The use of different modes on their own and in combination with the aim of obtaining an optimal and sustainable utilization of resources (EC, Sustainable mobility for our continent: Mid-term review of the European Commission’s 2001 transport White Paper)

• Focus on pax and shipper• Mixed public-private system• Sustainable (energy use and GHGs)• Inclusive planning • Demand and supply sides• Co-modal?

Canal Bridge, Amsterdam

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Recommendations to Transportation Providers

1. Policy Context is Dynamic: Pressures to restore the economy, deal with the nation’s debt and deficit issues and shift policy priorities will make this a fluid policy environment for the next several years. Make sure you are responsive to the change.

2. Promote Sustainability: Analyze your agency’s carbon footprint and energy use. Prioritize the highest return, lowest cost solutions and move to instill sustainability throughout the organization.

3. Define Your Projects for the Policy Context: What contributions will your projects make to the new set of national priorities? What are the net contributions for GHG emissions, energy use, mobility, and job creation?

4. Practice Inclusive Planning on a Metropolitan and Regional Basis: Most regions, reinforced by federal policy, do not effective tie public and private, passenger and freight, and modal planning together. To make system improvements better integration of planning is required (including for the ways modes are connected).

5. Help Educate Policymakers and Shape Authorizations: Lots of misconceptions about transportation. The industry needs to define the benefits and help redesign all transportation programs. If it cannot be done this cycle for surface and air transportation, we should work toward solutions for the next reauthorizations.

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For more information:

See Eno Brief and the National Journal Transportation Blog

Available at enotrans.com

Stephen D. Van Beek, Ph.DPresident/CEO

Eno Transportation Foundation1250 Eye Street, Suite 750

Washington, D.C. 20005(202) 879-4711

svanbeek@enotrans.com

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