Funding Infrastructure in A Weak Economy TRANSPORTATION: Funding Infrastructure in A Weak Economy Steve Heminger Executive Director, MTC California Institutional Investors Forum VI April 14, 2011 M e t r o p o l i t a n T r a n s p o r t a t i o n C o m m i s s i o n

2 Bay Area Economic Backdrop  The Bay Area labor market is experiencing a stronger recovery than most of California, but is lagging behind the rest of the nation

3 Bay Area Economic Backdrop  The recession has resulted in a significant contraction in taxable sales growth  Sales tax growth has entered positive territory again after two years of dramatic decline

Bay Area Economic Backdrop 4 Jobs in millions But long-term regional job projections keep falling

5 Bay Area Building Boom  Despite poor indicators in general economy, Bay Area infrastructure construction is strong  In FY 2010 – MTC allocated over $300 million in bridge tolls to transit and highway capital projects – Bay Area sponsors obligated over $ 1 billion in federal funding, including remaining ARRA funds – Bay Area sponsors awarded over $50 million in Proposition 1B corridor mobility projects.

6 Stretching Across: New Bay Bridge Takes Shape  MTC’s Bay Area Toll Authority, Caltrans and the California Transportation Commission are jointly overseeing this critical seismic safety project.  The twin decks of the steel SAS are on track to join up with the already completed 1.2-mile Skyway portion of the new bridge in the fall of 2011, with the opening of the full East Span anticipated in 2013.

7 Rising Above: East Span Tower Nears Top  The tower now stands 480 feet above the water line, just shy of its full height of 525 feet – with two crowning sections to go.

8 Breaking Ground: “Grand Central Station of the West”  When it opens in 2017, the Transbay Transit Center will serve as a hub for 11 bus and rail operators, including the planned California high-speed rail system.  MTC helped secure $400 million in federal funding for the $4.2 billion project, which is also benefiting from $350 million in MTC-managed bridge tolls, among other local, state and federal sources.

9 Tunneling Through: New Fourth Bore for Caldecott Tunnel  The $390 million project will add two new lanes to State Route 24 connecting Alameda and Contra Costa counties.  Construction got underway in February 2010, when work began on the portal walls at either end of the tunnel.  MTC has been a major supporter of the fourth bore, helping to secure $180 million in federal stimulus funds and contributing $50 million in Regional Measure 2 bridge toll moneys.

10 State of Good Repair: A New Generation of Rail Vehicles  Replace BART’s existing 669 cars  Estimated cost: $3.2 billion  Initial procurement of 200 cars is underway with options for remaining 469 cars  In December 2010, MTC established a policy-level commitment of roughly $870 million in federal funding for Phase 1 Funding Plan

11 Recent Bay Area Infrastructure Success Factors  Bridge tolls available to accelerate project development and construction – Poised region well for state Prop 1B bond and federal ARRA funds – Hit the construction market at time of low bids – Use of bridge tolls for $200 million state private placement bond to keep projects under construction when state bonds stalled  Strategic and creative fund management – Up front transfer of tolls from BATA to MTC to move projects to construction earlier – Sequencing of projects through transit expansion strategic plan resulted in BART extensions to Antioch and Warm Springs advancing

12 State Funding Backdrop  California faces $25 billion general fund deficit  Treasurer delays bond sales until Fall 2011  Bay Area projects stalled: CountyProjectCost Napa/SolanoState Route 12 Jameson Canyon$140 million Santa ClaraUS 101 Auxiliary Lanes $102 million Santa ClaraInterstate 880 HOV Lanes: State Route 237 to US 101 $95 million Contra CostaMarina Bay Grade Separation$40 million

13 Federal Funding Backdrop  President Obama signed the seventh extension of SAFETEA through end of FY 2011  Prospects for a multi-year authorization remain uncertain – No clear national goals to guide new program – No support for revenue sources to support higher investment – Possible prohibition on earmarks  Collection of federal gas tax expires on September 30, 2011

14 21 st Century Infrastructure: The Key to Restoring America’s Competitive Edge “The third step in winning the future is rebuilding America. To attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information — from high-speed rail to high-speed internet.” — Barack Obama, 2011 State of the Union address

15 21 st Century Infrastructure: The Key to Restoring America’s Competitive Edge  Nationwide, $79 billion per year is needed just to preserve the highway system in its current condition, while more than $132 billion is needed to improve conditions, according to the United States Department of Transportation (USDOT).  This is over three times current funding levels.

16 21 st Century Infrastructure: The Key to Restoring America’s Competitive Edge The national commitment to maintain our transportation system in a state of good repair should have the following elements:  It should be performance-driven, cost-effective and multimodal.  It should reward states, metropolitan areas and transit agencies that demonstrate progress in reducing maintenance backlogs.  It should establish a ten-year target to restore the nation’s surface transportation infrastructure to a state of good repair. 25-Year Funding Shortfalls in the San Francisco Bay Area (in billions of year-of-expenditure $) Maintenance Total Needed Expected Funding AvailableShortfall Local Streets and Roads$34.5$23.3$11.2 Transit Capital Replacement$40.3$24.2$16.1 State Highway Maintenance$17.0$4.0$13.0 TOTAL$91.8$51.5$40.3

Metropolitan Mobility: Setting Goals and Achieving Results  Investing a larger share of federal transportation funds in our metropolitan areas will focus on the key drivers of prosperity: high-value jobs, educated workers, and institutions of higher learning. Major Metros Contain the Fundamental Drivers of Prosperity: 65 Percent of the Nation’s Population and 75 Percent of the U.S. GDP Percentage of National Activity in 100 Largest Metro Areas, Various Indicators, Source: Brookings Institution, 2007 (

18 Metropolitan Mobility: Setting Goals and Achieving Results Congress should create a Metro Mobility Program that:  Provides accountability through performance objectives consistent with national goals for congestion relief, access to transit, air quality and climate change.  Provides direct-funding allocation to major metro areas with a population of 1 million or more.  Establishes flexible project eligibility to assure that the most effective projects are selected.  Requires the same local match and project screening requirements regardless of the type of project.

19 Paying the Bill: Restore the User Fee System  Urge Congress to replace the current federal excise (per gallon) taxes on gasoline and diesel fuel with a fixed sales tax initially set on a revenue-neutral basis.

20 Paying the Bill: Restore the User Fee System  In order to generate equivalent revenue to the current federal excise tax, the sales tax rate would need to be about five percent (at a national average gasoline price of $3.60 per gallon). This solution meets three critical tests:  It does not raise taxes.  It does not worsen the federal deficit.  It closes the gap in the growing federal surface transportation program.

21 Paying the Bill: Restore the User Fee System  By shifting from a per-gallon tax to a sales tax on fuel, Congress can maintain the user-fee principle that has characterized federal transportation funding for generations.

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