Investing in Our Public Infrastructure to Create Jobs

7/28/2019 Investing in Our Public Infrastructure to Create Jobs

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Investing in Our Public

Infrastructure to Create Jobs

May 28, 2013


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Table of Contents

Preface............................................................................................................................................................... 5

Introduction .................................................................................................................................................... 8

Infrastructures Importance to Economic Growth and Job Creation .......................................... 9

Chart 1: Construction Employment ......................................................................................... 11

Infrastructure Systems........................................................................................................................... 12

Surface Transportation ................................................................................................................ 12

Water and Wastewater ................................................................................................................ 13

Electricity ........................................................................................................................................... 15

Maritime ............................................................................................................................................ 15

Aviation ............................................................................................................................................. 16

Education and Health Care ........................................................................................................ 17

The Role of Government .......................................................................................................................... 17

Federal ........................................................................................................................................................ 17

State............................................................................................................................................................. 20

Financing and Funding Challenges and Opportunities................................................................. 21

Chart 2: Cumulative Infrastructure Needs by System Based on Current Trends

Extended to 2020 and 2040 ....................................................................................................... 21

Surface Transportation.......................................................................................................................... 21

Gas Tax .............................................................................................................................................. 23

Sales Tax on Gas ............................................................................................................................ 23

Vehicle Miles Traveled Fee ......................................................................................................... 24

Fares and Tolls ................................................................................................................................ 25

Other Revenue Sources and Considerations ....................................................................... 25

Challenges and Opportunities for Other Infrastructure Systems .......................................... 25


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Water and Wastewater ................................................................................................................ 26

Electricity ........................................................................................................................................... 26

Maritime ............................................................................................................................................ 27

Aviation ............................................................................................................................................. 28

Public Schools ................................................................................................................................. 28

Safety Net Hospitals ..................................................................................................................... 30

Financing Strategies to Increase and Supplement Investment and Create Jobs............. .... 32

Traditional Debt Financing and Assistance ................................................................................... 32

Tax-Exempt Municipal Bonds .................................................................................................... 33

Chart 3: Top Six State and Local Infrastructure Categories Using ............ ............. ...... 33

Tax Exempt Financing, 2003-2012 ........................................................................................... 33

Private Activity Bonds .................................................................................................................. 34

Transportation Infrastructure Finance and Innovation Act .............. ............. ............. .... 35

Grant Anticipation Revenue Vehicles ..................................................................................... 35

Transportation Investment Generating Economic Recovery ...................... ............ ....... 35

Build America Bonds .................................................................................................................... 36

Innovative Debt Financing and Assistance .................................................................................... 36National Infrastructure Bank ..................................................................................................... 37

State Infrastructure Banks .......................................................................................................... 38

Partnerships ..................................................................................................................................... 38

Chart 4: Infrastructure Acceleration Layer Cake ................................................................. 39

Performance-Based Infrastructure ............. ............. ............. ............. ............. ............. ......... 40

Public Pension Funds, Fixed Income Financing Instruments ...................... ............. .. 41

Energy Efficiency Retrofits Program Models.................................................................... 42

Clinton Global Initiative: Financing Energy Efficient Retrofits................................. 43

Clinton Global Initiative: Investing in Post-Sandy Reconstruction and

Other Critical Infrastructure................................................................................................. 44

Private Equity and Other Partnerships with Private Investors ............. .............. ........ 44


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Lessons Learned....................................................................................................................... 46

Project Management and Efficiency ................................................................................... 47

Looking Forward.......................................................................................................................................... 48

Surface Transportation Reauthorization, MAP-21 ...................................................................... 48

Passenger Rail Investment and Improvement Act ...................................................................... 49

Water Resources Development Act.................................................................................................. 49

Water Quality Protection and Job Creation Act........................................................................... 50

Building Infrastructure Finance and Innovation Act................................................................... 50

Marketplace Fairness Act ..................................................................................................................... 51

Supporting Actions to Protect First Responders ......................................................................... 51

Assistance to Firefighters Grant ............................................................................................... 51

Staffing for Adequate Fire and Emergency Response ..................................................... 51

Urban Area Security Initiative and the State Homeland Security Grant Program . 52

Promoting Fair Wages and Benefits for First Responders ............. .............. ............ ....... 52

Conclusion ..................................................................................................................................................... 53


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Preface

The Democratic Governors Association, Center for Innovative Policy presents, Investing

in Our Public Infrastructure to Create Jobs a Policy Series white paper developed with

guidance from Labor Union Partners representing multiple trades and workers and

prepared by My Campaign Group.

Various infrastructure assets roads, bridges, dams, sewer systems, water pipelines and

public schools throughout the U.S. are either at the end of their lifecycle or nearing it

and require maintenance and repair. An increasing population has placed added strain

on our infrastructure over time to the extent that the functionality of certain elements

has been compromised.

Democratic governors recognize the economic benefits associated with having a well-

designed, efficient infrastructure. Yet lack of available funding has impacted governors

abilities to comprehensively address their states infrastructure needs. Faced with these

challenges, Democratic governors have sought to make infrastructure investment a

priority, putting people back to work repairing and improving our critical infrastructure.

Vermont Governor Shumlin has embarked on a multi-million dollar technology

access project that's expanding broadband, cellular phone service and smart grid

telecommunications capacity to underserved areas of the state, bringing high-

speed connectivity to businesses, schools, health care providers and first

responders as part of the state's commitment to providing universal broadband


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access by the end of 2013. A mix of federal, state and private funding has helped

to make this project possible. (2013)

Maryland Governor OMalley together with Senate President Miller and House

Speaker Buschhave succeeded in passing a $4.4 billion transportation investmentplan that will support more than 57,000 jobs over the next six years, ease traffic

congestion and build a 21st century transportation network. The governor also

signed the Maryland Offshore Wind Energy Act of 2013 that creates a mechanism

to incentivize the development of a 200 MW offshore wind facility, which will

support almost 850 manufacturing and construction jobs for five years and an

additional 160 ongoing supply and Operations & Maintenance (O&M) jobs

thereafter. (2013)

Massachusetts Governor Patrickproposed to increase the level of

transportation capital investment by $13 billion over the next 10 years to create a

state-of-the-art transportation network thats able to provide fast and reliable

service, while attracting and supporting sustainable economic growth in the

future. Governor Patrick would raise revenue for these critical investments by

cutting the sales tax from 6.25 percent to 4.5 percent and dedicating all proceeds

to a fund for public works to support transportation, the school building fund

and other infrastructure. In addition, the governors proposal would increase the

income tax rate by 1 percentage point to 6.25 percent in order to raise sufficient

revenue to support education initiatives, double the personal exemptions so thatthe increase is fair to all taxpayers and eliminate outdated, complicated special

favors in the tax code. (2013)

Oregon Governor Kitzhaber committed to funding the I-5 Bridge Replacement

by signing legislation authorizing the state to borrow $450 million to pay for its

share of the $3.4 billion bridge and transit project that will connect Oregon and

Washington. The construction-ready project increases safety, reduces congestion

and improves the transport of goods to markets across the country and around

the world. (2013)

California Governor Brown advanced his $23 billion proposed Bay Delta

Conservation Plan, one of the largest Habitat Conservation Plans ever carried out

in the U.S. This massive undertaking will secure the water supply for 25 million

people from earthquakes and other potential calamities, and will restore tens of


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thousands of acres of natural habitat needed for threatened and endangered

species. (2013)

Delaware Governor Markell created The Delaware New Jobs Infrastructure Fund

to allow the state to quickly make significant investments in public infrastructure

to accommodate the relocation or expansion of large scale employers. Revenue

allocated to this fund must be spent for infrastructure improvements, including

roads and utilities, intended to attract new businesses to Delaware or assist those

looking to expand in the state. (2012)

Hawaii Governor Abercrombie released more than $1.14 billion over the last

year for various capital improvement projects selected for their potential to

immediately address priority maintenance and improvement work on state

infrastructure and facilities, while stimulating the local economy and generating

job opportunities. (2013)

Minnesota Governor Dayton proposed a $750 million bonding bill for shovel-

ready construction projects, including a major State Capitol building renovation,

facility upgrades and repairs at public colleges and universities, modernizing

state-run veterans homes and funding for flood preservation efforts that would

create an estimated 21,000 jobs. (2013)

Illinois Governor Quinn launched a $1 billion Illinois Clean Water Initiative

through an expansion of the state revolving fund (SRF) program that will provide

long-term, low-interest loans to help local governments overhaul their water andwastewater infrastructure, including pipelines and treatment plants that would

create or support 28,500 jobs across Illinois. (2012)

Connecticut Governor Malloy unveiled the Next Generation Connecticut

initiative proposing to invest nearly $2 billion in the University of Connecticut that

would significantly increase the number of students and faculty in Science,

Technology, Engineering and Math (STEM) related fields. The proposal calls for

$1.54 billion in bonding to build new STEM facilities, expand teaching and

research labs, upgrade information technology and renovate and build additionalhousing and parking. (2013)

New York Governor Cuomo has used innovative approaches to boost

infrastructure investment since 2011. The cadre of initiatives in New York is

geared toward stretching infrastructure dollars with smart investments. These

initiatives include passage of design-build legislation, which shifts the risk of


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large projects from taxpayers to construction firms, and the NY Works Task Force,

which works to align the $16 billion capital projects among the states 45

agencies. Adding to these proven successes, the governor has now proposed a

$1 billion Green Bank that would combine public and private capital in order to

create a funding mechanism to finance renewable energy technologies and clean

energy projects that hold potential to create jobs and further diversify the states

energy portfolio. (2013)

Introduction

Our nations infrastructure includes a variety of assets all with strategic importance to

our economy. It connects people, places and ideas; allows for the exchange of goods

and services; and promotes productivity and efficiency. Investing in infrastructure

should be a priority an opportunity to put people back to work in good-paying jobs

with benefits building and renovating America.

Yet infrastructure spending has not kept pace with needs over the years, and as a

consequence our infrastructure has deteriorated and its financial burden has grown. Its

estimated that the U.S. needs to spend $2.2 trillion over the next decade just to keep

infrastructure in fair condition and safe for public use.1 Besides maintenance needs,

much of our infrastructure isnt able to effectively support population growth, causing

traffic congestion on our roads, electricity to be lost from our antiquated power grid,and water to be wasted in our pipes, None of this is good for our environment, and all

of it infringes on productivity. Unwillingness to increase infrastructure spending by

elected officials in Washington and, at times, those in state government has made it

increasingly challenging for Democratic governors to responsibly fund infrastructure

projects. Without adequate investment, our economy will not grow to its potential, with

the direct effect of fewer jobs and lower wages.

Critics contend that among the reasons they dont support increasing infrastructure

spending is because of diminishing revenues, budget shortfalls and aversion to debt,but chronic underfunding is really a matter of choice. For example, the federal excise

tax the financing mechanism used to fund the Highway Trust Fund (HTF) isnt

1Peter Bacque, Rendell: Infrastructure will crumble without investment, Richmond-Times Dispatch, Sept.

21, 2012,http://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-

investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.html
http://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.htmlhttp://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.htmlhttp://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.htmlhttp://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.htmlhttp://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.htmlhttp://www.timesdispatch.com/business/rendell-infrastructure-will-crumble-without-investment/article_f1a2b490-50e8-5d46-aae9-4cb8bf3992aa.html


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generating enough revenue to cover highway construction and maintenance needs,

because for the last 20 years it hasnt been adjusted to take inflation into account.

Not surprisingly, shutting down investment in

infrastructure doesnt reflect the views of a majority of

Americans. According to a recent Gallup poll from

March 2013, 72 percent of Americans would support a

program that spends government money to put

people back to work on urgent infrastructure repair

projects.2 In fact, the poll found that this type of job-

creating proposal is backed by all party groups

Democrats, Independents and Republicans even at a

time when deficit reduction is a high priority.3

This white paper discusses why infrastructure investment is so critical to our economy,

and the potential it holds to create jobs in industries, like construction, where people

still struggle to find work. It takes a closer look at the financing and funding challenges

that Democratic governors face, and offers potential solutions based on best practices

that could help stretch public financing and possibly close the funding gap that has

developed. Its purpose; however, isnt meant to advocate one solution over another,

but rather to acknowledge the range of ideas that exist.

Information covered in this paper came from various labor unions collaborating with theDemocratic Governors Association for the benefit of Democratic governors wanting to

strengthen their commitment to protect the interests of workers and the unions that

represent them. Working with labor to grow the economy is a great opportunity for

states to partner.

Infrastructures Importance to Economic Growth and Job Creation

The quality of our infrastructure has a direct impact on our economy. Its vast inter-connected systems allow U.S. businesses to compete world-wide and sustain and create

2Americans Widely Back Government Job Creation Proposals, Gallup Politics, Mar. 20, 2013,

http://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-

proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUT

WEi0.twitter3 Ibid.

Seventy-two percent of

Americans would support aprogram that spends

government money to put

people back to work on

urgent infrastructure repair

projects.
http://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitterhttp://www.gallup.com/poll/161438/americans-widely-back-government-job-creation-proposals.aspx?utm_source=add_this&utm_medium=addthis.com&utm_campaign=sharing#.UUmZWUTWEi0.twitter


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hundreds of thousands of jobs for American workers. Despite its importance, our

infrastructure is decaying and needs upgrading.

A quarter of our bridges are deficient or obsolete.4 We lose seven billion gallons of

clean drinking water each year from leaking pipes.5 Nearly half of the 257 locks on the

more than 12,000 miles of inland waterways that the U.S. Army Corps of Engineers

(Corps) operates are functionally obsolete, with the number expected to increase to 80

percent of all locks by 2020.6

The American Society of Civil Engineers (ASCE) in its

latest Report Card for Americas Infrastructure graded

the U.S. infrastructure a D+ only modestly better

than the D it received four years prior in 2009.7 The

slight improvement is attributed to state and localgovernments acting on their own to secure financing

to initiate projects rather than wait for the federal

government to provide funding.8 Although the

progress is encouraging, the problems remaining are

significant. ASCE estimates that

we should be investing $1.6 trillion more than what we now spend to protect against a

future shortfall; they predict that it will cost $3.6 trillion to repair and modernize roads,

bridges, dams and schools by 2020.9

The worsening condition of our infrastructure today

threatens economic growth and job creation in the

future. We stand to lose one million jobs each year by

2020 from a projected $1 trillion loss in sales, $324

4American Society of Civil Engineers, 2009 Report Card for Americas Infrastructure,

http://www.asce.org/Infrastructure/Report-Card/2009-Report-Card-for-America-s-Infrastructure/5

Ibid.6 Ibid.72013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/8Small Infrastructure Gains Are Observed in Engineering Report, John Schwartz, New York Times, Mar.

19, 2013,http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-

infrastructure.html?_r=092013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/

We should be investing

$1.6 trillion more than

what we now we spend

Continued underinvestment

in infrastructure is projected

to cost each U.S. family

about $10,600 from 2010 to

2020.
http://www.asce.org/Infrastructure/Report-Card/2009-Report-Card-for-America-s-Infrastructure/http://www.asce.org/Infrastructure/Report-Card/2009-Report-Card-for-America-s-Infrastructure/http://www.infrastructurereportcard.org/http://www.infrastructurereportcard.org/http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.infrastructurereportcard.org/http://www.infrastructurereportcard.org/http://www.infrastructurereportcard.org/http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.nytimes.com/2013/03/19/us/engineers-report-small-gains-in-nations-infrastructure.html?_r=0http://www.infrastructurereportcard.org/http://www.asce.org/Infrastructure/Report-Card/2009-Report-Card-for-America-s-Infrastructure/


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billion in exports and $1.2 trillion in disposable

income that could occur without adequate

investment.10 And delaying investment costs

businesses and households, too. Higher running costs

and travel delays from road, bridge and transportdeficiencies alone cost taxpayers approximately $130

billion in 2010.11 Continued underinvestment in

infrastructure is projected to cost each U.S. family about $10,600 from 2010 to 2020.12

Additionally, the price tag to modernize and maintain our infrastructure increases by

$150 billion for every year its postponed.13

To make matters worse, much of our infrastructure is crumbling at a time when so many

men and women are out of work. As depicted in Chart 1, construction has experienceda significant drop in employment since December 2007 about the start of the

recession, with only modest job gains reported in recent months. Although our nations

unemployment rate is decreasing overall, 15.7 percent of construction workers currently

lack jobs.14 Depressed demand for construction materials also means that supply costs

are relatively cheap.

Now is the time we should be investing in America, both to maintain our current

infrastructure and build for our 21st century economic needs.

Chart 1: Construction Employment

10LiUNA! Testimony of Terence M. OSullivan General President Laborers International Union of North

America Transportation and Infrastructure Committee, U.S. House of Representatives, February 13, 2013(figures attributed to the American Society of Civil Engineers).11Investing in Infrastructure: A question of trust, The Economist, May 12, 2012,

http://www.economist.com/node/2155457912Failure to Act: The Economic Impact of Current Investment Trends In Surface Transportation, American

Society of Civil Engineers, Jul. 2011,http://www.asce.org/infrastructure/report-card/economic-study/13 Ibid.14 U.S. Department of Labor, Bureau of Labor Statistics, Economic News Release, Mar. 8, 2013,

http://www.bls.gov/news.release/empsit.nr0.htm
http://www.economist.com/node/21554579http://www.economist.com/node/21554579http://www.asce.org/infrastructure/report-card/economic-study/http://www.asce.org/infrastructure/report-card/economic-study/http://www.asce.org/infrastructure/report-card/economic-study/http://www.bls.gov/news.release/empsit.nr0.htmhttp://www.bls.gov/news.release/empsit.nr0.htmhttp://www.bls.gov/news.release/empsit.nr0.htmhttp://www.asce.org/infrastructure/report-card/economic-study/http://www.economist.com/node/21554579


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Source: Bureau of Labor Statistics

Its time to sound the alarm about our nations chronic underfunding problem, with

hope that greater awareness will lead to action.

Infrastructure Systems

Infrastructure is a broad term that describes multiple organizational structures (or

systems), including but not limited to highways, bridges and tunnels, transit and rail,

water treatment facilities and sewers, maritime ports and airport runways, public

buildings that serve to educate and deliver health care as well as recreational parks, in

addition to our electrical grid and telecommunications network. Each system plays a

critical role in facilitating economic growth and job creation. This paper focuses on the

following systems of infrastructure in order to closely examine the individual needs ofcertain ones in greater detail.

Surface Transportation

Surface transportation infrastructure consists of highways, railroads, bridges and transit

systems that connect people and places. A growing population and an increase in

5,250

5,500

5,750

6,000

6,250

6,500

6,750

7,000

7,250

7,500

7,750

(Employment in Thousands)

5,802March 2013

-1,688

7,490

December 2007


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economic growth from global trade has put strain on an aging network, with many

highways and rail systems built over 50 years ago.15

The 2013 Report Card for Americas Infrastructure graded our bridges and rails a C+

and roads and transit a D based on capacity, conditioning, funding, future need,

operation and maintenance, public safety and resilience.16 A separate ASCE report on

surface transportation published in 2011 predicts that the poor condition of our

infrastructure could cost the U.S. economy about 876,000 jobs and constrain GDP

growth by almost $900 billion by 2020.17

Because surface transportation is so vast and encompasses so many different modes of

transportation, its condition can vary significantly depending upon location and number

of users. For example, infrastructure is generally poorer in urban areas compared to

rural areas. Its sometimes this difference in perception that can mask infrastructures

economic impact and societal urgency relative to other public services. Additionally, the

overall condition of state-controlled roads has actually improved over time, according to

a recent study.18 Yet many problems remain to address, and rather than throw money

at the problem; targeted spending is likely the answer.

Water and Wastewater

Our pipeline infrastructure that supports our water and wastewater (sewer) systems

urgently needs assessment and modernization. Its current status earned our water

infrastructure a D on the 2013 Report Card for Americas Infrastructure.19 More than

half of the U.S. pipeline system (also includes natural gas lines) was built before any

federal regulatory oversight was enacted.20 The Environmental Protection Agency (EPA)

determined that 30 percent of pipes are between 40 and 80 years old in areas that serve

15 National Surface Transportation Policy and Revenue Study Commission,

http://transportationfortomorrow.com/global/did_you_know.htm162013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/17Failure to Act: The Economic Impact of Current Investment Trends In Surface Transportation, American

Society of Civil Engineers, Jul. 2011,http://www.asce.org/infrastructure/report-card/economic-study/18Examining 20 Years of U.S. Highway and Bridge Performance Trends, Reason Foundation, Feb. 21,

2013,http://reason.org/news/show/20-years-of-highway-bridge-performa192013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/20 The United Association supports water infrastructure:

http://www.uagetinvolved.org/updates/WaterInfrastructure_IssuePaper.pdf
http://transportationfortomorrow.com/global/did_you_know.htmhttp://transportationfortomorrow.com/global/did_you_know.htmhttp://www.infrastructurereportcard.org/http://www.infrastructurereportcard.org/http://www.asce.org/infrastructure/report-card/economic-study/http://www.asce.org/infrastructure/report-card/economic-study/http://www.asce.org/infrastructure/report-card/economic-study/http://reason.org/news/show/20-years-of-highway-bridge-performahttp://reason.org/news/show/20-years-of-highway-bridge-performahttp://reason.org/news/show/20-years-of-highway-bridge-performahttp://www.infrastructurereportcard.org/http://www.infrastructurereportcard.org/http://www.uagetinvolved.org/updates/WaterInfrastructure_IssuePaper.pdfhttp://www.uagetinvolved.org/updates/WaterInfrastructure_IssuePaper.pdfhttp://www.uagetinvolved.org/updates/WaterInfrastructure_IssuePaper.pdfhttp://www.infrastructurereportcard.org/http://reason.org/news/show/20-years-of-highway-bridge-performahttp://www.asce.org/infrastructure/report-card/economic-study/http://www.infrastructurereportcard.org/http://transportationfortomorrow.com/global/did_you_know.htm


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population of more than 100,000.21 Older pipes compromise public safety and cost

money in inefficiencies and emergency repairs. More than 240,000 water main breaks

were reported in the U.S. in 2008 alone.22 The risk of pipeline leakage should be

addressed with a comprehensive approach so that our pipeline infrastructure is resilient,

efficient and secure.

Although pipes are our greatest capital need, expanding and improving wastewater

treatment plants as well as providing equipment to prevent sewer overflows are also

needed. A 2009 report by the General Accounting Office (GAO) found that the EPA

estimates that 850 billion gallons of untreated sewage is discharged from wastewater

systems into surface waters each year, which can contaminate the drinking water

supply.23

And theres good reason to fund water infrastructure from an economic perspective.Water infrastructure is an effective and underused job creation opportunity. Needed

investment in this area could create millions of jobs across various sectors, not just

construction.24 The Alliance for American Manufacturing (AAM) commissioned a study,

published in 2009, that found water infrastructure projects to be leaders in job creation,

with nearly 20,000 total jobs (i.e., direct, indirect and induced) for every $1 billion

spent.25 The Clean Water Council also released a study that same year that found

investing $1 billion in water infrastructure could produce even higher job benefits

generating between 20,000 and 26,000 full-time jobs.26 Additionally, the U.S.

Conference of Mayors (USCM) estimates that every job created in water infrastructure

adds 3.7 jobs elsewhere, and for each dollar invested in water infrastructure $6.35 is

added to the national economy.27 Theres a significant need for skilled labor to perform

21 Ibid.22 Ibid.23 Ibid and GAO report number GAO-09-657, Jun. 2009,http://www.gao.gov/assets/300/291776.html24LiUNA! Testimony of Terence M. OSullivan General President Laborers International Union of North

America Transportation and Infrastructure Committee, U.S. House of Representatives, Feb. 13, 2013

(figures attributed to the American Association of State Highway and Transportation).25 How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,

Commissioned by the Alliance for American Manufacturing, Jan. 2009

http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf26Sudden Impact, Clean Water Council, Feb. 2, 2009 draft,

http://www.acec.org/advocacy/committees/pdf/water_projects_020209_draft.pdf27Mayors Water Infrastructure Report Shows Investment Yields High Returns ,The United States

Conference of Mayors, , Aug. 14, 2008 (press release),

http://usmayors.org/urbanwater/documents/NYWATERREPORTRELEASE_081408.pdf
http://www.gao.gov/assets/300/291776.htmlhttp://www.gao.gov/assets/300/291776.htmlhttp://www.gao.gov/assets/300/291776.htmlhttp://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdfhttp://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdfhttp://www.acec.org/advocacy/committees/pdf/water_projects_020209_draft.pdfhttp://www.acec.org/advocacy/committees/pdf/water_projects_020209_draft.pdfhttp://usmayors.org/urbanwater/documents/NYWATERREPORTRELEASE_081408.pdfhttp://usmayors.org/urbanwater/documents/NYWATERREPORTRELEASE_081408.pdfhttp://usmayors.org/urbanwater/documents/NYWATERREPORTRELEASE_081408.pdfhttp://www.acec.org/advocacy/committees/pdf/water_projects_020209_draft.pdfhttp://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdfhttp://www.gao.gov/assets/300/291776.html


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this work in order to ensure proper repairs and modernizations are effective in

protecting public and environmental health; union investment in worker training could

be leveraged.

ElectricityOur energy infrastructure earned a D+ on the 2013 Report Card for Americas

Infrastructure due to its poor condition.28 Despite greater investment in power

transmissions, limited maintenance, permitting issues and weather events have led to

more power interruptions and failures.29 Much of our energy infrastructure was built a

half century ago well before the digital age and innovations in clean energy

technologies occurred. Growing demand for electricity coupled with the desire to

integrate new energy sources into our existing grid has put pressure on our energy

infrastructure, stretching its limits to accommodate more than it was planned to do.Aside from needing to make critical improvements to an aging and outdated electrical

grid, its also necessary that we invest in its supporting infrastructure, like electric

distribution centers, new transformers and technology. This will ensure we have an

advanced energy infrastructure that can continue to effectively deliver power to users.

Maritime

Maritime transportation is an important economic driver and a critical element of our

nations transportation and security systems. Our waterways infrastructure spans morethan 12,000 miles of commercial inland and intra-coastal waterways and includes more

than 240 lock chambers together with 300 commercial harbors.30 Our maritime industry

is responsible for transporting 10 percent of all tonnage throughout the U.S. and nearly

20 percent of the entire value of all freight moved across our whole domestic

transportation system.31

The Corps oversees all of our commercial waterways, including the 11,000 mile-stretch

that comprises the Inland Waterway System (IWS), which levies a federal fuel tax to

navigate. The Corps are primarily responsible for developing, operating and

282013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpa29 Ibid.30American Society of Civil Engineers, Failure to Act: The Impact of Current Infrastructure Investment on

Americas Economic Future, Jan. 15, 2003, http://www.asce.org/failuretoact/31 Ibid.
http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpahttp://www.infrastructurereportcard.org/a/#p/grade-sheet/gpahttp://www.asce.org/failuretoact/http://www.asce.org/failuretoact/http://www.asce.org/failuretoact/http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpa


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maintaining our commercial waterways infrastructure as well as maintaining and

regulating channel depths through dredging and water management.

Infrastructure projects for commercial waterways developed by the IWS dont have a

local cost-sharing partner, and instead are funded partly by general revenues from the

U.S. Treasury and partly from the Inland Waterways Trust Fund (IWTF). The IWTF is

financed by a $0.20 per gallon diesel fuel assessment thats collected for river-miles

traveled across the IWS. Operation and maintenance for the IWS is funded from general

revenues.

Maritime policy isnt currently included in the surface transportation reauthorization

bill.32 The failure of Congress to overlook this systems importance could cause the U.S.

to lose its position in the global economy to countries, like China, that continue to make

critical investments. By not adequately investing in ports and harbors, the jobs of more

than 500,000 workers employed in this industry are put at risk.

Additionally, many of our levees were built over 50 years ago. The ASCE found that

repairing and restoring our national levees could cost more than $100 billion spending

thats critical to protect homes, businesses and farmland from flooding.33

Aviation

Eighty percent of U.S. passenger origin and destination movements that account for 343

million trips each year occur at 35 airports within the nations top 15 markets.34 The

Federal Aviation Administration (FAA) predicts that enplanements in these 15 markets

will grow by 30 percent by 2020 and 121 percent by 2040.35 Consequently, air and

ground congestion related to aviation at major airports and surrounding regions is an

increasing threat to economic productivity. Its largely because weve fallen short on

32

The Vital Role of Maritime Transportation In Our Economy, Transportation Trades Department, AFL-CIO,Mar. 2012,http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-

maritime-transportation-in-our-economy/33U.S. Gets Low Marks On Infrastructure From Engineers Group, NPR, Mar. 19, 2013,

http://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-

trillion34American Society of Civil Engineers, Failure to Act: The Impact of Current Infrastructure Investment on

Americas Economic Future, Jan. 15, 2003, http://www.asce.org/failuretoact/35 Ibid.
http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-trillionhttp://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-trillionhttp://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-trillionhttp://www.asce.org/failuretoact/http://www.asce.org/failuretoact/http://www.asce.org/failuretoact/http://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-trillionhttp://www.npr.org/2013/03/19/174767342/upgrading-americas-failing-infrastructure-could-cost-1-6-trillionhttp://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/


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aviation, which has not kept pace with the needs of our national economy that the 2013

Report Card for Americas Infrastructure gave the system a D.36

Education and Health Care

Education (e.g., schools and buildings used for education purposes, including facilities

within our public four-year college and university and community college systems)

represents a large component of our non-defense infrastructure assets. We know that

theres a direct relationship between the quality of the infrastructure, particularly

regarding features, such as acoustics and air quality, and student learning.37 Health care

(e.g., hospitals, community health centers and free clinics) also accounts for an

important share of our infrastructure assets. Research tells us that factors, including use

of anechoic tiles, access to daylight, accommodation arrangements designed to limit

transmission of infection and even carpeting can help improve patient outcomes.38 In

both instances, the federal government supports only a small portion of their totalinfrastructure investment. State and local governments fund the majority of our

education and health care infrastructure, particularly as it relates to operation,

maintenance and expansion. Although both asset types are necessary to support a

thriving economy, education, in particular, plays an integral role in the productivity of

our workforce.

The Role of Government

Governments obligationshave increased as the nations infrastructure has advancedand improved over time. Responsibility varies across government levels and systems,

with diverse degrees of investment, management, planning and maintenance required.

Federal

Infrastructure is the foundation of our nation. It was built with a strong federal role and

should be expanded and maintained with a strong federal role. There isnt a single

American who doesnt benefit from and doesnt want good roads and safe bridges,

362013 Report Card for Americas Infrastructure, The American Society of Civil Engineers,

http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpa37 Building Minds, Minding Buildings,http://www.aft.org/pdfs/psrp/bmmbcrumbling1106.pdf38Effects on Healthcare Environmental Design and Medical Outcomes, Roger S. Ulrich, Ph.D.,

International Academy for Design and Health,

http://treebenefits.terrasummit.com/Documents/Health/Effects%20of%20Healthcare%20environments.pdf
http://www.infrastructurereportcard.org/a/#p/grade-sheet/gpahttp://www.infrastructurereportcard.org/a/#p/grade-sheet/gpahttp://www.aft.org/pdfs/psrp/bmmbcrumbling1106.pdfhttp://www.aft.org/pdfs/psrp/bmmbcrumbling1106.pdfhttp://www.aft.org/pdfs/psrp/bmmbcrumbling1106.pdfhttp://treebenefits.terrasummit.com/Documents/Health/Effects%20of%20Healthcare%20environments.pdfhttp://treebenefits.terrasummit.com/Documents/Health/Effects%20of%20Healthcare%20environments.pdfhttp://treebenefits.terrasummit.com/Documents/Health/Effects%20of%20Healthcare%20environments.pdfhttp://www.aft.org/pdfs/psrp/bmmbcrumbling1106.pdfhttp://www.infrastructurereportcard.org/a/#p/grade-sheet/gpa


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clean drinking water and efficient airports, waterways, abundant energy and good

jobs.39

Federal governments fundamental authority is to ensure that our infrastructure systems

are safe, efficient and reliable. It sets the vision for how our network of infrastructure

systems should look and function. Any effort to eliminate the federal governments role

and shift responsibility to the states ignores our nations history and the achievements

made by Presidents Hamilton, Jefferson, Lincoln, Eisenhower and Reagan who

understood that a basic transportation infrastructure allows for economic development

and promotes expansion.

Furthermore, infrastructures needs are simply beyond the capacity of state and local

governments to address. If the federal government were to shift a greater share of

responsibility to states and municipalities, in all likelihood, our infrastructure wouldbecome fragmented and inefficient; productivity would decrease; and economic activity

would slow. Although private investment may provide a supplemental resource, theres

not enough private capital available to replace federal investment.

Compounding the funding problem in the immediate future is the federal budget

sequester, which affects are still largely unknown. The sequestration imposes damaging

cuts to transportation that will reduce federal spending at a time when our economy is

fragile and many workers are unemployed. While the full impact of these cuts wont

become apparent for several months, spending reductions cut across all modes oftransportation and federal agencies. Although the Highway Trust Fund (HTF) that funds

the majority of highway and transit programs is protected, discretionary funding that

provides grants for new or expanding transit systems will be impacted, which could halt

projects and result in job loss in multiple states. The Maritime Security Program that

provides naval support also stands to lose funding. It faces cuts higher than those

imposed on non-defense discretionary programs, and federal maritime workers serving

defense functions most likely will be affected.

Since taking office four years ago, President Obama has made infrastructure investment

a priority. Throughout his time in the White House, he has vocalized his strong

commitment to rebuilding Americas infrastructure, and repeatedly says that making our

infrastructure safer, makes businesses and workers more competitive in a global

39Terry OSullivan, General President of Laborers International Union of North America


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economy. Above all, the President understands the potential that greater infrastructure

investment provides to unleashing thousands of good-paying jobs for projects that

cant be outsourced.

In his recent State of the Union40 address and subsequent Fiscal Year 2014 budget41, the

President proposed creating a fix-it-first program that would put unemployed workers

back to work as quickly as possible on our nations most urgent infrastructure repairs.

His budget specifically calls for an initial, upfront investment of $50 billion for

infrastructure, $40 billion of which would be spent on maintenance and updates for

existing infrastructure as part of the fix-it-first program. The remaining $10 billion

would be used to attract private capital for high-value projects through the Rebuild

America Partnership that includes creating a National Infrastructure Bank (NIB) in order

to upgrade and modernize maritime ports, pipelines, schools and other systems

businesses rely on to remain competitive. His proposed Rebuild America Partnership

would get $4 billion to implement expansions of the Transportation Infrastructure

Finance and Innovation Act (TIFIA) and the Transportation Investment Generating

Economic Recovery (TIGER) Discretionary Grant programs that provide debt financing

for infrastructure projects, and his budget calls for $7 billion for the American Fast

Forward (AFF) bond program that would be used to attract new sources of capital. The

Presidents budget also includes funding for NextGen and high-speed rail, in addition to

an increase in federal transportation spending that would cut red tape associated with

permitting, regulatory review, procedures and policies to cut delivery times in half forinfrastructure projects.

The programs and policies expressed in the State of the Union and included in the

Presidents budget expand on 2009 Recovery Act financing, which put American workers

to work improving more than 350,000 miles of U.S. roads and repairing or replacing

over 20,000 bridges, since the President took office. Additionally, the U.S. Department

of Transportation (DOT) has built or improved more than 6,000 miles of rail, 40 rail

stations and purchased 260 passenger rail cars and 105 locomotives. The Presidents

40 Note: Information for this paragraph and the following paragraph came from the text of President

Obamas 2013 State of the Union address, available here:

http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-

address.html?pagewanted=all&_r=0as well as the White House Fact Sheet: The Presidents Plan to Make

America a Magnet for Jobs by Investing in Infrastructure, available here:http://www.whitehouse.gov/the-

press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastru41The Presidents Budget for Fiscal Year 2014:http://www.whitehouse.gov/omb/budget
http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0http://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.whitehouse.gov/omb/budgethttp://www.whitehouse.gov/omb/budgethttp://www.whitehouse.gov/omb/budgethttp://www.whitehouse.gov/omb/budgethttp://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.whitehouse.gov/the-press-office/2013/02/20/fact-sheet-president-s-plan-make-america-magnet-jobs-investing-infrastruhttp://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0http://www.nytimes.com/2013/02/13/us/politics/obamas-2013-state-of-the-union-address.html?pagewanted=all&_r=0


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motivation to address the nations infrastructure needs has resulted in the investment of

more than 350 miles of new rail and bus rapid transit, in addition to supporting

Americas manufacturing industry by investing in 45,621 buses and 5,454 rail cars.

It will be up to Congress as to whether the Presidents proposals and budget gain

support.

Also, on the table are proposals to cap or eliminate tax-exempt municipal bonds

conceivably the single most important financing tool used by state and local

governments to support essential infrastructure investments. These bonds represent a

partnership between the federal government and state and local governments and

private investors in contributing to public infrastructure projects. Limiting or taking

away that benefit would jeopardize financing for future projects and therefore should be

opposed. Additionally, a number of important pieces of legislation that directly impactfederal infrastructure spending are either up for reauthorization this year or will be in

the years that immediately follow. If any of these bills should fail to pass, it could limit

states abilities to leverage public and private financing and undoubtedly would reduce

essential funding to states for infrastructure projects, potentially forcing governors to

seek new funding alternatives to make up the loss. The Looking Forward section of the

paper discusses various bills in more detail and makes the case for why its important

that Congress pass critical infrastructure legislation.

State

A states role can widely vary by infrastructure system, with lines of distinction

sometimes blurred. For example, the federal government provides only minimal

funding for school facilities through a few programs. School facility maintenance and

modernization is traditionally viewed as a local issue, yet its relatively easy to make the

case that these facilities are economic assets that are of national interest, in addition to

health and safety concerns. Furthermore, infrastructure maintenance and operation

sometimes involves various owners and operators public and private; such is the case

with water, electricity, maritime and aviation systems, among others, with the state

playing only a limited role.


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Financing and Funding Challenges and Opportunities

Chart 2: Cumulative Infrastructure Needs by System Based on Current Trends

Extended to 2020 and 2040

(Dollars in $2010 billions)

Source: Failure to Act, American Society of Civil Engineers

Surface Transportation

Americas system for financing surface transportation infrastructure is obsolete.

Although the statement can be applied across most infrastructure systems, its especiallytrue for surface transportation, which represents the biggest funding gap of all systems,

illustrated in Chart 2.

How surface transportation is financed sheds light on our growing spending problem,

and overshadows its devastating effects on our transportation system and overall

economic competitiveness. If nothing is done to fix surface transportations funding

mechanisms, millions of jobs will be in danger and our freight and passenger rail

transportation systems could further decline.

With 1.3 million construction workers out of work and the construction industrys

unemployment rate at 15.7 percent the highest rate of any sector its extremely

important that Congress address this problem.42 Adequate investment in surface

42 U.S. Department of Labor, Bureau of Labor Statistics, Economic News Release, Mar. 8, 2013,

http://www.bls.gov/news.release/empsit.nr0.htm

Total

Needs

Expected

Funding

Funding

Gap

Total

Needs

Expected

Funding

Funding

Gap

Surface Transportation $1,723 $877 $846 $6,751 $3,087 $3,664

Water and Wastewater $126 $42 $84 $195 $52 $144

Electricity $736 $629 $107 $2,619 $1,887 $732

*Airports $134 $95 $39 $404 $309 $95

Inland Waterways and Marine Ports $30 $14 $16 $92 $46 $46

Totals $2,749 $1,657 $1,092 $10,061 $5,381 $4,681

20402020

Infrastructure Systems

* Airport needs and gaps include anticipated cost of NextGen $20 billion by 2020 and $40 billion by 2040.
http://www.bls.gov/news.release/empsit.nr0.htmhttp://www.bls.gov/news.release/empsit.nr0.htmhttp://www.bls.gov/news.release/empsit.nr0.htmhttp://www.bls.gov/news.release/empsit.nr0.htm


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transportation could create eight million jobs over four years and drastically reduce the

number of unemployed construction workers nationwide.43 We also need strong policies

that help transit systems weather economic downturns.

Chart 2 figures show that if nothing is done to increase spending; the U.S. will be short

$846 billion for critical surface transportation projects by 2020 and more than $3 trillion

by 2040. With the insolvency of the HTF surface transportations prime financing

mechanism for roads and bridges forecasted in 2015, politicians shouldnt prolong

reform any longer, as inaction will only worsen the problem.

The federal government currently imposes an excise tax of 18.4 cents per gallon of

gasoline and 24.4 cents per gallon of diesel fuel whose proceeds are used to fund the

HTF. Because its levied as a flat tax, its not indexed for inflation, and consequently its

value has fallen by about 33 percent since 1993 the last time the tax was raised.44

Forcomparison, the 20-year difference between the rate charged today and the rate

charged in 1993 is about 12 percent of the cost of gasoline.45 As a result, the HTF now

collects significantly less revenue than what it pays out. Additionally, outlays to states

havent reflected the decline in collections. Between 2005 and 2009, each state actually

got a higher allocation than it contributed, with monies from the General Fund used to

cover the deficit.46 Absent any changes, the HTF can expect to have a $365.50 billion

shortfall over the next 23 years.47

Intensifying calls for reform is that the trust funds insolvency is projected to coincidewith the expiration of the surface transportation reauthorization legislation, known as

MAP-21. MAP-21 stabilized the trust expenditures in order to provide Congress more

time to reform the HTFs financing mechanism. However, if MAP-21 expires, yearly

investments in transit would decline from $11 billion to $3.5 billion and highways could

43LiUNA! Testimony of Terence M. OSullivan General President Laborers International Union of North

America Transportation and Infrastructure Committee, U.S. House of Representatives, Feb.13, 2013

(figures attributed to the American Association of State Highway and Transportation).44 Transportation Trades Department, AFL-CIO, Policy Brief, Options for Avoiding the Highway Trust Fund

Cliff, Adopted. Feb. 24, 201345 Ibid.46 Ibid.47 Ibid.


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lose a staggering $35.5 billion.48 A scenario like this one would almost certainly halt

planned projects and put millions of jobs at risk.

Gas Tax

One approach to address the HTF insolvency problem and increase collections would be

to simply increase the gas tax assessment and index it for inflation. A proposed rate

increase has been a part of various debt relief packages in the past. 49 For example, in

late 2010, through contemporary discussion, the Simpson-Bowles Commission

recommended increasing the gas tax by 15 cents per gallon over three years, with

revenues committed to fund transportation.50 Although the recommendation hasnt

been implemented, discussion of this nature should continue to be a part of budget

negotiations and ultimately included in a deficit agreement.

The National Conference of State Legislatures (NCSL) reports that at least 17 states have

taken a leadership role on the gas tax proposing to reform or supplement it with fee

increases in order to fund repairs for roads and bridges.51 The majority of states dont

index their gas tax for inflation, and consequently revenue generated continues to fall

short for whats needed.

Sales Tax on Gas

Absent agreement on the gas tax, other approaches to eliminate the HTF shortfall

should be considered. The former Executive Director of the American Association of

State Highway and Transportation Officials (AASHTO) called for changing the current

cents per gallon assessment to a sales tax levied on gasoline. Under the proposal, an

assessment would be imposed that would generate at least $350 billion for surface

transportation funding over six years.52 Based on the proposals analysis, drivers would

pay about $1 more per week per vehicle for gasoline than what they now spend under

the cents per gallon rate. Structuring the assessment this way would ensure that a user

fee the preferred financing method continues to finance the HTF, and that the

assessment automatically adjusts with the price of fuel.

48 Ibid.49 Ibid.50 Ibid.51State Gas Taxes Head Higher, The Wall Street Journal, Apr. 3, 2013,

http://online.wsj.com/article/SB10001424127887323916304578401022066112256.html52 Ibid.
http://online.wsj.com/article/SB10001424127887323916304578401022066112256.htmlhttp://online.wsj.com/article/SB10001424127887323916304578401022066112256.htmlhttp://online.wsj.com/article/SB10001424127887323916304578401022066112256.html


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Vehicle Miles Traveled Fee

Another financing method that has been proposed is a mileage-based road charge,

such as a Vehicle Miles Traveled (VMT) fee. A VMT fee charges drivers a relatively small

assessment for each mile driven. Similar to the conventional gas tax, a VMT feepreserves the long-favored user fee financing mechanism for the HTF. Although

multiple transportation commissions have recognized the potential that VMT fees hold,

the concept will require more study in order to alleviate public fears about privacy and

reasonable fee assessments.

No state has a VMT fee to-date, although both Oregon and Iowa have introduced the

concept on a pilot-basis.

Oregons Road User Fee Task Force researched 28 different funding options before

deciding to pilot a VMT fee in Portland, as a way to ensure that motorists, driving fuel-

efficient vehicles, support the roads they travel on. At the pilots 12-month conclusion

in 2007, a report was prepared for the Legislature that showed that VMT fees could

provide a viable revenue option if expanded statewide and many of the issues related to

collection, payment, technology and privacy could be overcome.53 Oregon launched its

second 12-month pilot in 2012 to test the concept further. A final report will be

prepared for the 2013 Oregon Legislature on its findings.54

A four-year study is being conducted by the University of Iowas Public Policy Center(PPC) as part of its Transportation Policy Research Program on the feasibility of

assessing and collecting mileage-based road user charges.55 The study involves

installing on-board computers with GPS in participants vehicles that monitor the

number of miles traveled and transmit the data to the PPC for processing and

evaluation. Its purpose is two-fold: 1) to assess how a mileage-based road user charge

would be received as a taxing system nationally and 2) to determine if the technology

for collecting mileage information is acceptable to users. The study is scheduled to be

completed in 2013 and a final report on its results will follow.

53Oregons Mileage Fee Concept and Road User Fee Pilot Program, Oregon Department of

Transportation, 2007http://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUFPP_finalreport.pdf54 Oregon, Road Usage Charge Pilot Program,

http://www.oregon.gov/ODOT/HWY/RUFPP/Pages/rucpp.aspx55National Evaluation of the Mileage-Based Road User Charges, University of Iowa, Public Policy Center,

Transportation Policy,http://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-

road-user-charge
http://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUFPP_finalreport.pdfhttp://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUFPP_finalreport.pdfhttp://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUFPP_finalreport.pdfhttp://www.oregon.gov/ODOT/HWY/RUFPP/Pages/rucpp.aspxhttp://www.oregon.gov/ODOT/HWY/RUFPP/Pages/rucpp.aspxhttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://ppc.uiowa.edu/transportation/study/national-evaluation-mileage-based-road-user-chargehttp://www.oregon.gov/ODOT/HWY/RUFPP/Pages/rucpp.aspxhttp://www.oregon.gov/ODOT/HWY/RUFPP/docs/RUFPP_finalreport.pdf


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With rapidly falling fuel consumption per mile driven, and thus lower fuel taxes to

maintain the highway system, something other than the traditional motor vehicle cents-

per-gallon tax is inevitable but politically challenging.

Fares and TollsUser fees in the form of fares and tolls are sometimes used to supplement maintenance

and operating costs typically associated with specific transportation projects, such as

roads, bridges and transit, but arent a replacement for conventional financing

mechanisms that fund the HTF. Appropriate levels of road and bridge tolls can cover

operating expenses for certain projects, but this isnt the case across-the-board. For

example, transit fares rarely cover the entire systems costs and therefore only provide

incremental funding.56

Other Revenue Sources and Considerations

With increased fuel efficiency standards scheduled to take effect by 2025, cars and light

trucks will be required to average 54.5 miles per gallon, which could exacerbate the

surface transportation shortfall already anticipated.57 Moreover, electric and natural gas

powered vehicles are increasingly entering the marketplace, as more consumers and

producers move to alternative fuel vehicles. Consequently, the existing funding

structure for the HTF will become less sustainable if its based solely on the consumption

of gas and diesel fuel. While a number of longer term options exist, the need to studyalternatives shouldnt be used as an excuse to prolong addressing the trust funds

imminent insolvency.

Challenges and Opportunities for Other Infrastructure Systems

56Transit Farebox Recovery and US and International Transit Subsidization: Synthesis, Washington State

Department of Transportation, Oct. 8, 2009,http://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-

4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdf57 Transportation Trades Department, AFL-CIO, Policy Brief, Options for Avoiding the Highway Trust Fund

Cliff, Adopted. Feb. 24, 2013
http://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdfhttp://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdfhttp://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdfhttp://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdfhttp://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdfhttp://www.wsdot.wa.gov/NR/rdonlyres/55CF12C9-9D4E-4762-A27A-407A44546BE2/0/TrasitFareboxRecoveryandSubsidiesSynthesisKTaylorFINAL2.pdf


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Water and Wastewater

The public sector is largely responsible for repairing and upgrading our nations water

and wastewater systems. About 85 percent of all systems are municipal-owned.58

However, federal and state policies and programs are critical to leveraging publicfunding and attracting private investment for water projects, especially since the

infrastructure that supports the delivery of water and wastewater is aging, and

replacement and upgrade needs are increasing faster than the funds available. Only

approximately 33 percent of water infrastructure projects are scheduled for funding

through 2020 based on data in Chart 2. By 2040, the funding gap increases, with just 27

percent of projects scheduled for funding.

Although the Clean Water Act (CWA)59 of 1972 has reduced water pollution and the Safe

Drinking Water Act (SDWA)60

of 1974 has made drinking water safer, without morefunding beyond whats available now, their achievements in public health could

diminish. To help states upgrade and expand drinking water systems, the federal

government should strengthen the SDWAs SRF by reauthorizing federal funding up to

$7.5 billion over five years so that more stringent federal and state environmental

standards could be met.61 Additionally, if the federal government were to do away with

the state cap on private activity bonds (PABs) for water infrastructure projects, it could

give states access to as much as $7 billion per year in private financing to carry out more

water projects.

62

Electricity

As the data in Chart 2 shows, we should be spending about $15 billion more each year

from now until 2020 to prevent the projected $107 billion funding gap in our electricity

infrastructure from happening. According to the ASCE, most of the shortfall will affect

grid investments. They project that the U.S. needs to spend $95 billion more just to

58

Financing Solutions for Water Infrastructure Investment, American Water,http://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-

103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdf59 Clean Water Act summary:http://www.epa.gov/lawsregs/laws/cwa.html60 Safe Water Drinking Act summary:

http://water.epa.gov/lawsregs/guidance/sdwa/upload/2009_08_28_sdwa_fs_30ann_sdwa_web.pdf61Drinking Water Conclusion, 2013 Report Card for Americas Infrastructure,

http://www.infrastructurereportcard.org/a/#p/drinking-water/conclusion62 Ibid.
http://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdfhttp://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdfhttp://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdfhttp://www.epa.gov/lawsregs/laws/cwa.htmlhttp://www.epa.gov/lawsregs/laws/cwa.htmlhttp://www.epa.gov/lawsregs/laws/cwa.htmlhttp://water.epa.gov/lawsregs/guidance/sdwa/upload/2009_08_28_sdwa_fs_30ann_sdwa_web.pdfhttp://water.epa.gov/lawsregs/guidance/sdwa/upload/2009_08_28_sdwa_fs_30ann_sdwa_web.pdfhttp://www.infrastructurereportcard.org/a/#p/drinking-water/conclusionhttp://www.infrastructurereportcard.org/a/#p/drinking-water/conclusionhttp://www.infrastructurereportcard.org/a/#p/drinking-water/conclusionhttp://water.epa.gov/lawsregs/guidance/sdwa/upload/2009_08_28_sdwa_fs_30ann_sdwa_web.pdfhttp://www.epa.gov/lawsregs/laws/cwa.htmlhttp://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdfhttp://files.shareholder.com/downloads/AMERPR/1789227155x0x590366/A40AD811-D0CF-4463-AF11-103BB583E32C/Financing_Solutions_White_Paper_Combined-FINAL-8.8.12.pdf


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modernize the grid, which could limit the occurrence of brownouts and blackouts,

saving businesses approximately $126 billion, and thereby protect against the loss of

529,000 jobs and $656 billion in personal income losses for American families.63

Upgrading our entire energy infrastructure would likely require as much as $2 trillion

over the next two decades, but holds the potential to create as many as 200,000 jobs

every year for the next 20 years for workers ready to put their skills to task.64

Maritime

Chart 2 illustrates the funding gap forecasted for our inland waterways and maritime

ports. If these predictions hold true, import and export costs would likely increase,

which could slow business activity and result in job loss. Since nearly 30 percent of

vessels traveling through domestic ports are already inhibited because of deficiencies

with our navigation channels, the economic and job loss that could occur if we continue

to ignore maintenance problems would be devastating.65

Part of the reason the funding gap came to bear is that Congress has diverted funding

from the Harbor Maintenance Trust Fund (HMTF) to other needs when the user fees

assessed on cargo arriving in U.S. ports were meant to fund operation and maintenance

of navigation channels.66 Consequently, theres now an excess of critical maintenance

projects.

Additionally, the trust fund (IWTF) that pays for half of the maintenance and

development costs of our commercial waterways infrastructure doesnt generate

enough revenue to support its needs. Consequently, its funding shortfall has reduced

the overall amount that can be invested in construction projects, which has resulted in

project delivery delays and increased total construction costs.Although proposals have been made to increase and supplement the trust funds

revenues, no proposal has yet to advance through the House or Senate. Instead, earlier

water resources development acts have been used to reform the fund.

63American Society of Civil Engineers, Failure to Act: The Impact of Current Infrastructure Investment on

Americas Economic Future, Jan. 15, 2003, http://www.asce.org/failuretoact/64Modernize Our Outdated Energy Infrastructure, Politico, Mar. 18, 2013,

http://www.politico.com/story/2013/03/modernize-our-outdated-energy-infrastructure-89026.html65 The Vital Role of Maritime Transportation In Our Economy, Transportation Trades Department, AFL-CIO,

Mar. 2012,http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-

maritime-transportation-in-our-economy/66 Ibid.
http://www.asce.org/failuretoact/http://www.asce.org/failuretoact/http://www.politico.com/story/2013/03/modernize-our-outdated-energy-infrastructure-89026.htmlhttp://www.politico.com/story/2013/03/modernize-our-outdated-energy-infrastructure-89026.htmlhttp://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.ttd.org/policy-statements/statements-archives/2012-statements/the-vital-role-of-maritime-transportation-in-our-economy/http://www.politico.com/story/2013/03/modernize-our-outdated-energy-infrastructure-89026.htmlhttp://www.asce.org/failuretoact/


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Aviation

Its not that we just need to expand and build more airports to address our aviation

infrastructure needs; the key to having less congested airspace is an Air Traffic Control

(ATC) system that can handle the volume of air traffic in our skies. NextGen

67

is thebroad name used to describe the transformation of our National Airspace System (NAS)

from a ground-based system to a satellite-based system. It has the capacity to relieve

airspace congestion, improve air safety and decrease aviations impact on the

environment. These combined benefits will enable aircraft to fly more direct routes and

minimize delays. NextGen is costly, but necessary, representing our aviation

infrastructures most pressing need. Figures in Chart 2 show that the majority of the

funding gap in aviation, at least for 2020, is due to NextGen.

Public Schools

A 2013 State of Our Schools report finds that schools are currently facing a $271 billion

deferred maintenance bill just to bring buildings up to working order. 68 This equates to

a cost of approximately $5,450 per student.69 The report also estimates that it would

cost $542 billion to bring primary and secondary schools both into good repair and

address modernization needs over the next 10 years.70 Yet this data may not fully

capture the true size and scope of the problem because little data is available. It has

been nearly 20 years since the federal government has conducted a comprehensive

assessment of the condition of its public schools.71 The last comprehensive report on

Americas school facilities was conducted by the GAO in 1995 and indicated that 15,000U.S. schools were circulating air that, at the time, was deemed unfit to breathe.72

Another challenge is that school districts with a higher proportion of low-income

children generally have less funding for new construction, renovations and maintenance

and repair than districts with wealthier student populations.73 It would cost at least $50

billion to bring schools in lower income districts up to parity.74

67 NextGen, Federal Aviation Administration,http://www.faa.gov/nextgen/why_nextgen_matters/what/68

2013 State of Our Schools Report, The Center for Green Schools,http://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINA

L.sflb.ashx69 Ibid.70 Ibid.71 Ibid.72 Ibid.73 Modernizing Schools: Making the Case for Federal Investment, National Education Association, 200874 Ibid.
http://www.faa.gov/nextgen/why_nextgen_matters/what/http://www.faa.gov/nextgen/why_nextgen_matters/what/http://www.faa.gov/nextgen/why_nextgen_matters/what/http://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINAL.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINAL.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINAL.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINAL.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_FINAL.sflb.ashxhttp://www.faa.gov/nextgen/why_nextgen_matters/what/


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Although increased education infrastructure spending for capital construction is needed,

states should carefully consider whether its advantageous to divert funding from the

education general fund to fill this gap, as a reduction in funding levels could jeopardize

maintenance of effort funding requirements and impact federal funding. Additionally,

states might want to avoid cutting tax rates in exchange for closing corporate tax

loopholes, as doing so, doesnt necessarily compensate for short-term revenue gains.

The federal government, with state and local support, could conduct regular surveys on

the condition of its public schools, so policymakers have a better understanding of what

needs to be done and how to best allocate resources. Among the recommendations in

the State of Our Schools Report are calls for75:

Better data collection and issues, including building age and site size as well

as separate accounting for utility and maintenance expenditures; and

allowing for differentiation in capital accounting for new construction and

renovation. These changes would allowthe condition and upkeep of our public

schools to be better monitored and allow for improved prioritization of

investment.

Providing more financial and technical assistance to states that could enable

themto more easily include facility data in their longitudinal education data

systems.

Designating a federal agency to perform a facility condition survey every 10

years, with the first one scheduled immediately to assess the conditions of our

public school infrastructure.

Funneling more federal dollars to school districts with the greatest

maintenance and repair needs either through direct investment or alternative

financing mechanisms. If the federal government made a one-time contribution

of $20 billion to school districts to eliminate a portion of their deferred

75 Center for Green Schools, 2013 State of Our Schools Report: Recommendations,

http://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Reco

mmendations.sflb.ashx
http://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Recommendations.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Recommendations.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Recommendations.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Recommendations.sflb.ashxhttp://centerforgreenschools.org/Libraries/State_of_our_Schools/2013_State_of_Our_Schools_Report_Recommendations.sflb.ashx


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maintenance, its estimated that it could create nearly 250,000 skilled

maintenance jobs with $6 billion for materials and supplies.76

Safety Net Hospitals

The Affordable Care Act (ACA) presents opportunities and challenges for public andnon-profit safety-net hospitals. The dramatic expansion of insurance coverage through

Medicaid and exchanges, along with new incentive payments aimed at reducing cost

and improving quality has the potential to grow and strengthe

Investing in Our Public Infrastructure to Create Jobs

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