1. TRANSPORTATION.ORG 1 MONDAY 23 MARCH 2015 2015 ANNUAL MEETING I-81 CORRIDOR COALITION ROANOKE, VA Joung H. Lee Policy Director American Association of State Highway and Transportation Officials MAP-21 REAUTHORIZATION Funding and Financing the Federal Program

2. TRANSPORTATION.ORG 2 FUNDING AND FINANCING THE FEDERAL PROGRAM Common Misperceptions About Transportation Funding and Making the Value Proposition Current Challenges Facing Federal Surface Transportation Funding Funding and Financing Frameworks at Federal and State Government Getting it Done: Recent Transportation Revenue Initiatives at the State Level Review of Current Federal Program Funding Proposals

3. TRANSPORTATION.ORG 3 A PARADOX Everyone says transportation Investment is important… o “66% of voters say that improving the country’s transportation infrastructure is extremely (27%) or very (39%) important. Another 27% say it is somewhat important. Just 6% say it is not important. o “Four in five (80%) voters agree that federal funding to improve and modernize transportation “will boost local economies and create millions of jobs from construction to manufacturing to engineering.” Just 19% disagree with this.” Source: The Rockefeller Foundation Infrastructure Survey

4. TRANSPORTATION.ORG 4 A PARADOX But they don’t want to pay Support for: o Private investment: 78% o National Infrastructure Bank: 60% o Bonding: 59% o Eliminating subsidies for American oil companies: 58% Opposition to: o Increasing the federal gas tax: 71% o Tolling interstate highways and bridges: 64% o Mileage-based user fee: 58% o New tax on foreign oil: 51% Source: The Rockefeller Foundation Infrastructure Survey

5. TRANSPORTATION.ORG 5 MAKING THE VALUE PROPOSITION Question: How much does the typical driver pay in gas tax in a year? Probably six thousand, seven thousand dollars a year

6. TRANSPORTATION.ORG 6 MAKING THE VALUE PROPOSITION “64% of voters say that how the government currently spends money on building and maintaining our transportation infrastructure is inefficient and unwise, including one in four (26%) who says it is very inefficient. Just 32% say the government currently spends efficiently and wisely.” Source: The Rockefeller Foundation Infrastructure Survey

7. TRANSPORTATION.ORG 7 FEDERAL AND STATE FUNDING: CURRENT CHALLENGES AND POSSIBLE PATHS FORWARD Common Misperceptions About Transportation Funding and Making the Value Proposition Current Challenges Facing Federal Surface Transportation Funding Funding and Financing Frameworks at Federal and State Government Getting it Done: Recent Transportation Revenue Initiatives at the State Level Review of Current Federal Program Funding Proposals

8. TRANSPORTATION.ORG 8 TRANSPORTATION FUNDING AS SHARE OF GDP

9. GAS TAX HEADWIND: SIGNIFICANT LOSS OF PURCHASING POWER

10. TRANSPORTATION.ORG 10 GAS TAX HEADWIND: SIGNIFICANT LOSS OF PURCHASING POWER

11. TRANSPORTATION.ORG 11 Source: Congressional Budget Office $57B drop GAS TAX HEADWIND: IMPACT OF ALTERNATIVE FUEL VEHICLES

12. TRANSPORTATION.ORG 12

13. TRANSPORTATION.ORG 13 Sep 2008: $8 billion General Fund transfer to HTF Aug 2009: $7 billion General Fund transfer to HTF Mar 2010: $19.5 billion General Fund transfer to HTF July 2012: $2.4 billion Leaking Underground Storage Tank Trust Fund transfer to HTF* Nov 2012: $5.9 billion General Fund transfer to HTF** Oct 2013: $11.7 billion General Fund transfer to HTF** Aug 2014: $9.765 billion General Fund transfer to HTF Aug 2014: $1 billion Leaking Underground Storage Tank Trust Fund transfer to HTF* Total General Fund transfers to Highway Trust Fund: $61.9 billion since 2008 ($65.3 billion inclusive of LUST transfers) CASH TRANSFERS FROM GENERAL FUND HAVE AVOIDED HIGHWAY TRUST FUND “FISCAL CLIFF” * This is not a transfer from General Fund as a portion of HTF receipts are normally deposited into Leaking Underground Storage Tank Trust Fund. ** Amount transferred after budgetary sequester.

14. For illustrative purposes, this scenario assumes an additional deposit of $4.4 billion into the Highway Trust Fund in FY 2015 ($3.7 billion to Highway Account; $0.7 billion to Mass Transit Account) and maintenance of a “minimum prudence balance” of $4 billion for the Highway Account and $1 billion for the Mass Transit Account. ©2015 American Association of State Highway and Transportation Officials. All Rights Reserved.

15. TRANSPORTATION.ORG 15 FEDERAL AND STATE FUNDING: CURRENT CHALLENGES AND POSSIBLE PATHS FORWARD Common Misperceptions About Transportation Funding and Making the Value Proposition Current Challenges Facing Federal Surface Transportation Funding Funding and Financing Frameworks at Federal and State Government Getting it Done: Recent Transportation Revenue Initiatives at the State Level Review of Current Federal Program Funding Proposals

20. TRANSPORTATION.ORG 20 CURRENT CHALLENGES FACING FEDERAL SURFACE TRANSPORTATION FUNDING Infographic available at http://invest.transportation.org

21. TRANSPORTATION.ORG 21  Fuel taxes (all states + DC + PR); 6 index; largest single source of highway funds used by half the states  Sales taxes on fuel, or other taxes on distributors or suppliers (14 states + PR)  Motor vehicle or rental car sales taxes (29 states)  Vehicle registration, license or title fees (48 states + PR)  Vehicle or truck weight fees (37 states)  Tolls (24 states + PR, plus non-state toll entities)  General funds (34 states + DC; Vt. on occasion)  Interest income (37 states + DC + PR)  Other (40 states + DC + PR) Source: National Conference of State Legislatures STATES HAVE LONG RELIED ON VARIOUS REVENUE SOURCES TO INVEST IN TRANSPORTATION

22. TRANSPORTATION.ORG 22 Tools that borrow against or leverage state revenues for surface transportation projects: o General obligation or revenue bonds (44 states + DC + PR) o GARVEE bonds (33 states + DC + PR) o Private Activity Bonds (PABs) (6 states) o TIFIA federal credit assistance (12 states + PR) o State infrastructure banks (SIBs) (34 states + PR) o Public-private partnerships (PPPs or P3s) (authorized in 33 states + PR) o Design-build (authorized in 38 states + PR) Source: National Conference of State Legislatures STATES ALSO UTILIZE VARIOUS FINANCING TOOLS TO ACCELERATE PROJECT DELIVERY

23. TRANSPORTATION.ORG 23 POTENTIAL OF THE PPP (P3) OPTION Can advance large complex transportation projects with revenue streams Can provide greater leveraging of revenue streams (access to private sources of investment capital) Can create cost savings and production / operating efficiencies Can transfer construction, financing and other risks from the public sector to private partner(s) BUT PPPs themselves do not create new money for state/local project sponsors. The private investment must be repaid with general revenue (taxes) or project-specific revenue (tolls). In other words, PPPs are project delivery and financing approaches, they are not funding sources.

24. TRANSPORTATION.ORG 24 FEDERAL AND STATE FUNDING: CURRENT CHALLENGES AND POSSIBLE PATHS FORWARD Common Misperceptions About Transportation Funding and Making the Value Proposition Current Challenges Facing Federal Surface Transportation Funding Funding and Financing Frameworks at Federal and State Government Getting it Done: Recent Transportation Revenue Initiatives at the State Level Review of Current Federal Program Funding Proposals

25. TRANSPORTATION.ORG 25 STATES ARE LEADING THE WAY ON MEETING THE TRANSPORTATION REVENUE CHALLENGE

26. TRANSPORTATION.ORG 26 Raising fuel taxes: California, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, South Carolina, South Dakota, Utah, Vermont, Wisconsin, Wyoming Directing gas tax proceeds to direct transportation uses: Indiana Reducing gas tax, but increasing other taxes for a net increase for transportation: Pennsylvania, South Carolina, Virginia RECENT STATE TRANSPORTATION REVENUE DISCUSSIONS (SUCCESSFUL STATES IN UNDERLINE)

27. TRANSPORTATION.ORG 27 General purpose funds toward transportation: Arkansas, Georgia, Idaho, Iowa, Michigan, Minnesota, Oregon, Pennsylvania, Texas, Virginia, Washington Sales taxes on fuel, or other variable taxes/fees: District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Pennsylvania, Puerto Rico, South Carolina, South Dakota, Texas, Utah, Virginia, West Virginia, Wisconsin Vehicle registration fees: California, Idaho, Illinois, Michigan, Pennsylvania, Virginia, West Virginia, Wisconsin RECENT STATE TRANSPORTATION REVENUE DISCUSSIONS (SUCCESSFUL STATES IN UNDERLINE)

28. TRANSPORTATION.ORG 28 Vehicle Miles Traveled (VMT) Fee: Oregon Framework to study a VMT fee: Arizona, Florida, Nevada, Washington, West Virginia, Wisconsin Special fees or taxes for electric or alternative fuel vehicles: Arizona, Georgia, Michigan, South Dakota, Virginia, Washington Source: National Conference of State Legislatures. STATE TRANSPORTATION REVENUE DISCUSSIONS (SUCCESSFUL STATES IN UNDERLINE)

29. TRANSPORTATION.ORG 29 Needs are reasonable and benefits are relatable to the public Users’ share of investment cost is clearer Strong political leadership is provided from the executive branch Formation of a broad coalition of supporters beyond self-interested groups SOME COMMON THEMES BEHIND STATE SUCCESS STORIES

30. TRANSPORTATION.ORG 30 Source: American Road and Transportation Builders Association ILLUSTRATIVELY, SHORING UP HTF WOULD NOT PRESENT AN UNREASONABLE BURDEN Average household pays $46 in federal and state gas tax per month. This is less than per monthly cost of: o Electricity and gas: $160 o Cell phone: $161 o Cable and internet access: $124 For example, a 10-cent increase in the federal gas tax translates to $1.15 more for the average driver per week—an action that would fix the Highway Trust Fund shortfall

31. TRANSPORTATION.ORG 31 FEDERAL AND STATE FUNDING: CURRENT CHALLENGES AND POSSIBLE PATHS FORWARD Common Misperceptions About Transportation Funding and Making the Value Proposition Current Challenges Facing Federal Surface Transportation Funding Funding and Financing Frameworks at Federal and State Government Getting it Done: Recent Transportation Revenue Initiatives at the State Level Review of Current Federal Program Funding Proposals

32. TRANSPORTATION.ORG 32 RECENT MILESTONES AND FUTURE DECISION POINTS Oct 1, 2014: MAP-21 extension begins Dec 16, 2014: Continuing Resolution/Omnibus Appropriations for FY 2015 enacted February 2, 2015: President’s budget for FY 2016 includes updated GROW AMERICA proposal March 5, 2015: House passes the Passenger Rail Reform and Investment Act of 2015 (PRRIA) Spring 2015: House and Senate developing air, surface, and passenger reauthorization proposals March 15, 2015: Debt ceiling suspension expiration May 31, 2015: MAP-21 extension expires Summer 2015: Highway Trust Fund insolvency expected

33. TRANSPORTATION.ORG 33 REVIEW OF CURRENT FEDERAL PROGRAM FUNDING PROPOSALS February 2015: Rep. Earl Blumenauer (D-OR) o Raise gas tax by 15 cents over three years and index; set up a road usage fee pilot program to succeed motor fuel taxes February 2015: The Obama Administration o Raise $268 billion in revenue from a 14 percent one-time tax on previously untaxed foreign income; deposit $238 billion to Transportation Trust Fund as part of the six-year GROW AMERICA Act January 2015: Sen. Barbara Boxer (D-CA) and Sen. Rand Paul (R- KY) o Invest in Transportation Act of 2015 allows voluntary repatriation of foreign earnings by US corporations earned in 2015 or earlier at a rate of 6.5 percent; revenues would be deposited into the Highway Trust Fund

34. TRANSPORTATION.ORG 34 REVIEW OF CURRENT FEDERAL PROGRAM FUNDING PROPOSALS January 2015: Rep. John Delaney (D-MD) and Rep. Richard Hanna (R-NY) o Infrastructure 2.0 Act generates $170 billion in revenue from one-time 8.75 percent existing overseas profits accumulated by US corporations o Provides $120 billion to HTF to support a six-year bill; $50 billion to capitalize American Infrastructure Fund July 2014: Senate Finance Committee and House Ways and Means Committee o $10.8 billion Short-term Highway Trust Fund patch using pension smoothing, customs duties, mortgage reporting, clarification of statute of limitations on basis overstatement, 100% continuous levy on Medicare providers, and other offsets

35. TRANSPORTATION.ORG 35 REVIEW OF CURRENT FEDERAL PROGRAM FUNDING PROPOSALS June 2014: Sen. Corker (R-TN) and Sen. Murphy (D-CT) o Increase gas tax by 12 cents per gallon and provide offsetting tax relief June 2014: Rep. DeFazio (D-OR) o Eliminate federal gas tax; implement per barrel tax on oil up to $6.75 May 2014: House Republican Leadership o End Saturday first class mail delivery; provides $10.7 billion in offsets over ten years February 2014: House Ways and Means Committee o One-time tax on certain corporate earnings and profits held by foreign subsidiaries over ten years; raises $126.5 billion

36. TRANSPORTATION.ORG 36 Joung H. Lee Policy Director American Association of State Highway and Transportation Officials 202-624-5818 jlee@aashto.org MAP-21 REAUTHORIZATION Funding and Financing the Federal Program