Major Investment In US Transportation Comes With Challenges
Major Investment In US Transportation Comes With Challenges
<p style="text-align: justify;">The US Congress passed the US$1.2 trillion Infrastructure Investment and Jobs Act (IIJA) in November 2021. While perhaps not “revolutionary,” it is “evolutionary” because it makes significant strides towards improving the US transportation system.</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Infrastructure Investment and Jobs Act (IIJA) </span></h2><p style="text-align: justify;">It is the first federal transportation bill in 6 years. It invests more money in public transit, intercity passenger rail, and electric vehicles (EVs), and most programs receive more funding than their prior baselines. </p><p style="text-align: justify;">It shifts a greater proportion of funding – 31% – to discretionary (competitive) grants relative to formula funding, meaning there is more money that states, and cities can compete for to fund worthy projects.</p><p style="text-align: justify;"><strong>Features of IIJA </strong></p><ul><li style="text-align: justify;"><p style="text-align: justify;">Highways and bridges are still the primary focus at over US$ 400 billion (including the largest dedicated bridge investment since Interstate System construction), there is nevertheless a shift in focus to equity, resilience, environment, and technology.</p></li><li style="text-align: justify;"><p>With EVs and alternative fuels, for example, the federal transportation bill calls for the development of a plan to build out the network and create a new joint office between the US Departments of Transportation (DOT) and Energy; it then allocates US$ 5 billion to build the network. Then there are competitive grants for states and communities to install EV chargers. </p></li><li style="text-align: justify;"><p style="text-align: justify;">Some programs attempt to expand intercity passenger rail in the US, while other attempts to reconnect neighborhoods divided by highway construction – both tall orders in an auto-oriented nation.</p></li></ul><p><strong>Outcomes of IIJA</strong></p><ul><li><p style="text-align: justify;">State, regional, and local transportation agencies – primarily tasked with executing the bill's tenets in the US Federalist structure – are excited but overwhelmed. </p></li><li style="text-align: justify;"><p>Even before the transportation bill, agencies and consulting firms were understaffed; there will likely be challenges in applying for funds and bottlenecks in delivering.</p></li><li><p style="text-align: justify;">Areas such as intercity passenger rail and alternative energies are likely to require the most help, as there is much less available knowledge in the US transportation industry in these areas. </p></li></ul><p><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/erikcempel/">Erik Cempel</a></em></span></p><p> </p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Erik Cempel </span></h3><h2 style="text-align: justify;"><span style="font-size: 12pt;">1. What are major concerns in the US relative to transportation? </span></h2><p style="text-align: justify;">At the immediate moment (summer 2022), supply chain disruptions, high gas prices, and a sharp rise in traffic fatalities are most urgent. Otherwise, asset management has been the most critical transportation concern over recent decades, particularly on the roadway side, as much of our current system was built in the 1950s-1970s and is past the end of its useful life; maintenance and reconstruction were, unfortunately never much considered or budgeted for during the massive expansion that happened at that time.</p><p style="text-align: justify;">Longer-term USDOT priorities for the current administration include climate change/environment and equity.</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">2. What are the difficulties in transportation planning? </span></h2><p style="text-align: justify;">Many of the difficulties in transportation planning in the US are much the same as anywhere else; getting good data, predicting the future when there are so many uncertainties, and balancing many different interests. However, the decentralized Federalist structure in the US makes transportation planning uniquely tricky here. </p><p style="text-align: justify;">The Federal government has very little power and authority and mostly is not involved in planning and building infrastructure; this is left to state and local governments. The Federal government merely passes on money and sometimes has rules associated with how that money is spent. </p><p style="text-align: justify;">To plan infrastructure across multiple local and state boundaries (which in the modern era is almost any project), one must bring together countless governments and agencies for agreement and get them all to dedicate funding. Constant election cycles across these government units mean priorities are constantly in flux.</p><p style="text-align: justify;">Further, every state, region, and city are likely to have its own laws, rules, and processes related to transportation and transportation planning, meaning that when starting a new project somewhere in the US, there will be a learning curve.</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">3. How much does the US spend on transportation infrastructure? </span></h2><p style="text-align: justify;">This is a little difficult to answer due to our Federalist, decentralized structure. In addition to Federal spending that flows down to state and local governments, every state spends its own money, as does every county, city, township, transit agency, toll authority, and countless other units of government that have taxing authority and build or maintain some forms of transportation infrastructure.</p><p style="text-align: justify;">According to a report by the Congressional Budget Office, in 2017, the Federal government spent US$ 72 billion, and state and local governments spent US $102 billion on capital investment for transportation and water infrastructure ($98 billion and $342 billion, respectively, if including operations as well). However, the latest Federal transportation bill includes nearly US$ 700 billion for transportation over five years, with significant funding increases in most areas.</p><h2><span style="font-size: 12pt;">4. How is transportation funded in the US?</span></h2><p>At the Federal level, the highway trust fund has been the primary source of transportation funding fueled by a federal gas tax. However, as the gas tax has not been increased in 30 years and it's not indexed to inflation, the government sometimes needs to transfer money from the general fund. </p><p>At the state and local levels, it varies; generally, gas taxes, sales taxes, and vehicle registration fees are common forms of funding.</p><h2><span style="font-size: 12pt;">5. Where does the US rank in public transportation? </span></h2><p>Public transportation is a local concern in the US, with some funding support from Federal and state governments. Generally, every city, town, or county has its own agency dealing with public transportation, so across a country, the size of the US, public transportation varies considerably.</p><p>Major cities, like New York and Chicago, tend to have extensive and reliable public transportation, including 24-hour subway services that are rare globally; public transportation is not extensive in much of the rest of the US, however.</p><p>With this variation across the US, it is challenging to provide a "rank," but I believe most planners would agree that our public transportation would rank relatively low on average compared to other developed, industrialized nations. Overall, our public transportation mode share is low compared to other OECD countries.</p><p> </p>
KR Expert - Erik Cempel
Human insights are irreplaceable in business decision making. Businesses rely on Knowledge Ridge to access valuable insights from custom-vetted experts across diverse specialties and industries globally.
Our flagship service, phone consultations, enables you to get access to first-hand, grass-root level information from our global expert network to form or validate your hypothesis.