Posted by guest blogger Billy Moore.
Billy Moore of Vianovo works with the Transportation Transformation Group, a consortia of public and private entities that looks at ways of improving the funding and financing of the nation’s transportation infrastructure, which is co-chaired by Nossaman Partner Geoffrey Yarema.
The House and Senate conferees have agreed on a compromise $305 billion five-year surface transportation authorization: the Fixing America's Surface Transportation (FAST) Act. The bill should be headed to the White House in the next few days. It would provide $281 billion from the Highway Trust Fund and up to $24.5 billion from the general fund, subject to annual appropriations.
It is funded in part by a one-time use of Federal Reserve surplus funds and by a reduction in the dividend national banks receive from the Fed. Lawmakers expect to pass the conference report this week and deliver it to the White House in time to avoid a shutdown of transportation programs at midnight Friday night.
The FAST Act
The bill increases contract authority for highway programs from their current total of $40.2 billion to $42.3 billion for fiscal year 2016; $43.3 billion for fiscal year 2017; $44.2 billion for fiscal year 2018; $45.3 billion for fiscal year 2019; and $46.4 billion for fiscal year 2020.
The transit contract authority totals would increase from $8.6 billion to $9.3 billion for fiscal year 2016; $9.7 billion for fiscal year 2017; $9.7 billion for fiscal year 2018; $9.9 billion for fiscal year 2019; and $10.2 billion for fiscal year 2020.
TIFIA is funded at $275 million for fiscal year 2016; $275 million for fiscal year 2017; $285 million for fiscal year 2018; $300 million for fiscal year 2019; and $300 million for fiscal year 2020. The redistribution provisions are repealed.
The bill adopts the three-year use-it-or-lose-it tolling provision, dropping the Senate's burdensome administrative process as well as the House requirement for legislative approval of tolling before submission.
The agreement relies on a combination of offsets to pay for the measure, including a cut in the dividend the Federal Reserve pays to certain member banks, tapping the Federal Reserve surplus account, transferring customs fees and selling a portion of the Strategic Petroleum Reserve.
Senate and House negotiators agreed to cap the Fed's surplus account at $10 billion and sweep any excess to the Treasury. The bill would also reduce the interest rate paid on capital that banks with more than $10 billion hold in the Federal Reserve System. The rate would be reduced to the high yield on a 10-year Treasury note in the last auction before a dividend is to be paid to the bank, as long as it is lower than the 6 percent that is currently paid. Lawmakers had been considering lowering the 6 percent dividend to 1.5 percent for member banks with more than $1 billion in assets, but met stiff pushback from the industry.
The bank dividend reduction is less than originally proposed. Banks with $10 billion or less in assets would be exempt from the reduction. The current dividend rate is 6 percent by statute. The bill would create a dividend tied to 10-year U.S. Treasuries, which currently yield about 2.2 percent. If Treasury yields rose higher than 6 percent, the Fed wouldn’t have to pay the banks more than that amount.
There are no provisions that address the issue of tax-exempt bonds.
The bill creates a Council on Credit and Finance responsible for reviewing applications for credit assistance programs, including TIFIA, PABs, the Nationally Significant Freight and Highway Projects (NSFHP) program and the Railroad Rehabilitation Improvement and Financing (RRIF) program. It also creates the National Surface Transportation and Innovative Finance Bureau to administer the application process for these programs to reduce project delays.
The NSFHP program is a new grant program under the bill, funded at $800 million for fiscal year 2016; $850 million for fiscal year 2017; $900 million for fiscal year 2018; $950 million for fiscal year 2019; and $1 billion for fiscal year 2020. The program would provide grants of up 60 percent federal money for highway, bridge, rail-grade crossing, intermodal and freight rail projects costing more than $100 million that improve movement of both freight and people, increase competitiveness, reduce bottlenecks, and improve intermodal connectivity.
The bill also includes a national freight formula program that would direct from between $1.15 billion (in FY 2016) to $1.50 billion (in FY 2020) per year of total highway formula apportionments to a new formula freight program authorized. Larger states would be required to spend their annual freight apportionment on projects on the primary highway freight system, on critical rural freight corridors, or critical urban freight corridors. Smaller states would be able to spend their money on projects on any part of the National Highway Freight Network within that state. States can obligate up to 10 percent of their total freight apportionment for intermodal or freight rail projects.
The legislation converts the Surface Transportation Program (STP) to a block grant program and increases the amount of STP funding that is distributed to local governments from 50 percent to 55 percent over the life of the bill. The bill rolls the Transportation Alternatives Program into STP and allows 50 percent of certain transportation alternatives funding to be sub-allocated to local areas for use on any STP-eligible project.
The proposal streamlines the environmental review and permitting process to accelerate project approvals and establishes a pilot program to allow up to five states to substitute their own environmental laws and regulations for the National Environmental Policy Act (NEPA) if the state’s laws and regulations are at least as stringent as NEPA. It provides for an assessment of previous efforts to accelerate the environmental review process, as well as recommendations on additional means of accelerating the project delivery process.
The bill includes a number of extraneous provisions, including the re-chartering of the Ex-Im Bank, regulatory relief for rural banks, credit unions and requiring that a consumer privacy notice need be sent only when disclosure policies change. Among the initiative left out is a proposal to cut the crop insurance program by $3 billion.
The budget and debt ceiling deal raised the sequester caps over two fiscal years by $80 billion. Appropriators have until December 11 to negotiate spending and policy provisions for the 12 annual appropriations bills.
Before departing for the Thanksgiving Recess, Senators began floor debate of their Transportation-HUD appropriations bill. The Senate shut down debate when Senator Rand Paul demanded to amend the bill to bar assistance for refugees.
Last year's bill funded programs totaling $53.8 billion. The House bill outlines $55.3 billion in spending while the Senate’s revised bill sets funding at $57.3 billion The House bill passed in June. An additional $100 million was added to the Senate bill for the TIGER program and an additional $311M for Federal Transit Administration Capital Improvement Grants. Other funding improvements were provided for Federal Aviation Administration facilities and equipment ($255 million); Home Investments Partnership Program affordable housing grants, or HOME; and community development block grants. The bill also includes an additional $50 million aimed at improving rail safety through infrastructure upgrades and Positive Train Control technology.
Both bills would offer approximately $40.25 billion from the Highway Trust Fund to be spent on the federal-aid highways program, unchanged from the FY2015 level.
Spending negotiators say they are confident about winning a final appropriations agreement, with the back-and-forth over policy riders unrelated to transportation the main obstacle to producing a final bill. They do not expect to produce a conference agreement until early next week.
Nossaman LLP’s 30-plus infrastructure attorneys offer clients, colleagues, strategic partners, and industry media a wealth of practical experience, insider insight, and thoughtful analysis here on Infra Insight. We blog about what we know best, from industry-leading procurements to local and national policy developments that affect the market and our clients.
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