Infrastructure Alert - July 2014

by Cozen O'Connor
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President Obama and Transportation Secretary Anthony Foxx have been urging Congress to fix the Highway Trust Fund before a projected funding depletion at the end of August. On July 1, Secretary Foxx sent letters to states informing their highway and transit agencies that absent Congressional action, the Department of Transportation will implement cash management procedures for the Federal Highway Administration on August 1 and warned of similar measures for the Mass Transit Account, possibly as soon as October. Starting August 1, the Department of Transportation will shift away from same-day reimbursements to limited payments based on the amount of cash available in the Highway Trust Fund and, when necessary, will distribute incoming funds in proportion to each state’s federal formula apportionment for FY2014. White House spokesmen have indicated, however, that the Administration supports neither a repatriation holiday nor an increase in the gas tax to bridge the Highway Trust Fund shortfall.

On Monday, Nicaragua approved a proposal by the HK Nicaragua Canal Development Investment Co Ltd to create a $40 billion, 172-mile canal from the Atlantic to the Pacific. This canal would serve as an alternative to the Panama Canal and is expected to be completed by 2019 for use in 2020.

On June 30, President Obama signed S. 2086, the Reliable Home Heating Act, into law. The law permits the Federal Motor Carrier Safety Administration to recognize emergency periods as declared by a state governor due to a shortage of residential heating fuel and waives certain FMCSA regulations for motor carriers or drivers carrying residential heating fuel under those conditions.

ON THE HILL

Leading up to the August recess, Congress and the industry will be focusing on trying to prevent the projected Highway Trust Fund depletion as well as laying the ground work for the eventual surface transportation reauthorization, given that the current authorization expires at the end of the fiscal year. There are a several competing opinions and recommendations from Members of Congress and interested parties as to how to broach both issues, but general consensus that action is preferred to inaction.

In the Senate, Finance Chairman Ron Wyden (D-Ore.) is working on modifying his proposal to extend the solvency of the Highway Trust Fund (HTF) through December. The original proposal was effectively dismissed by Republicans in late June. Chairman Wyden hopes that the bill, the “Preserving America’s Transit and Highways Act of 2014,” will be marked up and approved by his committee this week. His new proposal includes a $750 million transfer from the Leaking Underground Storage Tank (LUST) Trust Fund and removes the original proposal’s tax increase on vehicles weighing over 97,000 pounds. The $9 billion bill originally increased the tax from $550 to $1100 effective June 2015, which was estimated to raise $1.3 billion over the next 10 years.

On June 27, CBO responded to an inquiry from Chairman Wyden, who had asked “Of the additional $8 billion in revenues that CBO estimates would be necessary to meet the obligations of the Highways Trust Fund through December 31, 2014, how much would the highway account require and how much would the transit account require in order to meet their obligations?” CBO estimated that the highways account would require revenues of approximately $6.6 billion and the transit account would require revenues of approximately $1.5 billion. Prior, the CBO had told Chairman Wyden that a 6¢ gasoline tax increase would not be sufficient to keep the HTF solvent through December.

Of the proposed amendments to the bill, many are blatantly partisan amendments, but several are prospective funding mechanisms, including gasoline tax amendments. “Carper Amendment #1” calls for an annual 4¢ over the next three years, and thereafter, the gasoline tax to be adjusted for inflation according to the Consumer Price Index (CPI). Sen. Bob Corker (R-Tenn.) has been a surprise proponent of a 12¢ increase in the federal gasoline tax as well. He and Sen. Chris Murphy (D-Conn.) have been advocating for a 12¢ increase to the gas tax to be indexed to the CPI, but unlike Sen. Carper’s amendment, are calling for the increase over two years instead of three.

If the Senate continues to have difficulty passing a stopgap HTF funding bill, it could be an indication that a six-year surface transportation reauthorization would be politically infeasible as well, and that a shorter term bill may be more likely. Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) and House Transportation and Infrastructure Chairman Bill Shuster (R-Pa.) have both indicated their preferences for a long-term bill.

In the House, Ways and Means Chairman Dave Camp (R-Mich.) announced yesterday that his committee will markup a new proposal, H.R. 5021, to deliver $10 billion in revenue to the Highway Trust Fund, extending its solvency through May. Speaker of the House John Boehner has announced that the bill will have floor time next week. The bill, the “Highway and Transportation Funding Act of 2014,” includes a $1 billion LUST Trust Fund transfer, $3.5 billion in customs fees, and $6.4 billion in “pension smoothing,” a significantly different proposal than the one Senate Finance Committee is considering. Tomorrow’s markup comes after Ranking Member Sander Levin (D-Mich.) and the other Ways and Means Democrats again requested a hearing about the HTF.

Other congressmen had previously floated different ideas for shoring up the HTF. Rep. Earl Blumenauer (D-Conn.), the sponsor of a bill introduced in December to raise the gas tax by 15¢, has recently praised the Murphy-Corker plan of a 12¢ gas tax increase. On June 25, Chairman Dave Camp released a statement indicating his disappointment “that the Senate appears to be heading down a partisan road on highway funding” and asserting that “there is no way tax hikes to pay for more spending will fly in the House.” New House Majority Leader Kevin McCarthy has stated his opposition to raising the gasoline tax as well. Budget Committee Chairman Chris Van Hollen (D-Md.) has a proposal that would raise an estimated $19.5 billion from preventing foreign inversions, or mergers with a foreign company that results in a lower tax rate. A House Republican plan that has since been abandoned was to patch the HTF for a year by eliminating most Saturday U.S. Postal Service deliveries.

Senate Commerce Chairman Jay Rockefeller (D-W.Va.) and Ranking Member John Thune (R-S.D.) were sent a letter from a coalition of 58 maritime organizations urging a markup and vote on S. 2094, the Vessel Incidental Discharge Act. The bill would establish a national standard for ballast water and other vessel discharges. The letter criticizes the current manner in which ballast water and other discharges are regulated, as the Coast Guard and the Environmental Protection Agency regulate under different statutory authorities, and neither preempts state action.

Rep. Janice Hahn (D-Calif.) is expected to file a bill today that would establish a National Freight Network Trust Fund. The bill would require that 5 percent, an estimated $1.9 billion per year, of duties collected on imports to the United States be directed to the new trust fund.

On June 19, Senate Majority Leader pulled the minibus that included Department of Transportation funding, which had received a 95-3 procedural vote on June 17, because an agreement on amendments could not be reached. With a few exceptions, the Administration had voiced its support for the bill in a June 17 Statement of Administration Policy, praising the TIGER funding, increased Federal Railroad Administration safety funding, and Federal Transit Administration Capital Investment (New Start) grants, but opposing language that would suspend the Federal Motor Carrier Safety Administration’s hours of service rule.

Tomorrow, the House Transportation and Infrastructure Committee’s Public-Private Partnerships Panel will hold a hearing titled “Public Private Partnerships for America’s Waterways and Ports.” The panel will hear from the following participants: Jim Hannon, Chief of Operations and Regulatory Division of the U.S. Army Corps of Engineers; John Crowley, Executive Director of the National Association of Waterfront Employers; Mike Toohey, President and CEO of the Waterways Council, and Dave Kronsteiner, President of the Board of Commissioners for the Port of Coos Bay, Oregon.

AT THE AGENCIES

On July 2, the Coast Guard finalized rules for navigation in inland waterways. The rule aligns the Inland Navigation Rules in the Code of Federal Regulations with the Convention on the International Regulations for Preventing Collisions at Sea and incorporates recommendations from the Navigation Safety Advisory Council. The rule will go into effect on August 1.

The Federal Railroad Administration has eliminated a reporting requirement that requires each railroad carrier to file a signal system status report with the FRA every five years. As the FRA receives more updated data about railroad signal systems through alternative sources, it considers the rule unnecessary. The final rule is effective on September 2.

The Federal Maritime Commission raised its maximum fine amount for each statutory civil penalty subject to FMC jurisdiction by adjusting for inflation. The new fines will be effective as of July 11.

The Highway Trust Fund Ticker currently indicates that the Highway Account is estimated to be depleted by the end of August and the Mass Transit Account is estimated to decrease to approximately $1 billion by the end of September.

On June 27, President Obama nominated Christopher Hart to a two-year term as Chairman of the National Transportation Safety Board. He is currently the NTSB’s Acting Chairman and Vice Chairman. Former NTSB Chairman Deborah Hersman resigned in April to become President and CEO of the National Safety Council.

On June 25, the Government Accountability Office (GAO) published a report titled “Aviation Safety: Additional Oversight Planning by FAA Could Enhance Safety Risk Management.” The report details the FAA’s Air Traffic Organization’s Safety Management System (SMS) implementation. GAO recommended that FAA develop a plan to oversee industry SMS implementation.

IN THE STATES

California: At the Ports of Los Angeles and Long Beach, independent truck drivers are on strike against three trucking firms that operate at the ports: Total Transportation Services Inc., Green Fleet Systems, and Pacific 9 Transportation Inc. In addition to this labor disagreement, 20,000 International Longshore and Warehouse Union workers are currently renegotiating their labor agreement after a six-year deal with West Coast longshoremen expired on July 1. Any potential strike of these workers would be expected to be short, especially considering the emergency provisions in the Taft-Hartley Act that allow the President to end such a strike. The National Association of Manufacturers and the National Retail Association estimates that such a strike, however, could cost the U.S. economy as much as $1.9 billion a day for a five-day strike, $2.1 billion a day for a 10-day strike, and $2.5 billion a day for a 20-day strike.

Mississippi: On July 5, Mississippi Department of Transportation announced that it would wait to see whether Congress would be able to fund the Highway Trust Fund before putting future maintenance projects up for bidding in July.

New York: On June 26, the Environmental Facilities Corp.’s Board of Directors unanimously voted to approve the $511 million loan to the Thruway Authority to dredge the Hudson River and dismantle the current bridge to make way for the replacement Tappan Zee Bridge. State Senator John DeFrancisco, a voting member of the Public Authorities Control Board that must still unanimously approve the loan for it to be executed, has not ruled out voting against the loan. The board will meet next on July 16, and Sen. DeFrancisco wants a full financing plan in place before voting for the loan. The $3.9 billion Tappan Zee Bridge replacement secured a $1.6 billion TIFIA loan in December of 2013, the largest in program history.

Texas:The Federal Railroad Administration has announced that it and the Texas Department of Transportation will prepare an environmental impact statement for the proposed construction and operation of the Dallas-to-Houston high-speed rail line. The Central Texas High-Speed Rail Corridor project was proposed by a private company, the Texas Central High-Speed Railway. The Federal Railroad Administration is currently accepting comments.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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