Bloomberg News

Senate’s Highway Bill May Create Some Jobs, Kill Others

March 15, 2012

“It elevates a big-government ideology over a practical need to build our roads, bridges and other infrastructure,”  Indiana Governor Mitch Daniels  said in a statement about the bill. Photo: Daniel Boczarski/Getty Images

“It elevates a big-government ideology over a practical need to build our roads, bridges and other infrastructure,” Indiana Governor Mitch Daniels said in a statement about the bill. Photo: Daniel Boczarski/Getty Images

For a day at least, Washington lawmakers of both political parties worked together and passed a bill business groups said is vital to the U.S. economy.

Yet the Senate’s 74-22 bipartisan vote to approve a $109 billion surface transportation plan belied the difficulties ahead as a more divided House takes over the debate with 16 days left until the current highway law expires.

“Our nation’s neglected transportation system has created bottlenecks and inefficiencies that are getting worse every day,” said David French, the National Retail Federation’s senior vice president for government relations. “As bad as things are, they will only get worse if Congress misses the deadline we face.”

Spokesmen for construction trade groups and companies including Caterpillar Inc. (CAT), the largest construction and mining equipment maker, said they will be pressing the House to act by March 31. The federal government’s authorization to pay for highway construction and collect an 18.4 cent per gallon gas tax to pay for it will expire on that date.

“We believe that investing in our nation’s infrastructure will help keep America competitive in the global economy over the long run and will help drive employment in the near term, both of which are positive,” said Jim Dugan, a Caterpillar spokesman.

‘Crumbling of America’

When House leaders tried to bring a different bill to the floor last month, majority Republicans were so divided over how to pay for projects and whether mass transit should keep getting money from U.S. gasoline taxes that it wasn’t taken to a vote.

Members of Congress haven’t effectively made the case that transportation spending is good for the economy, said former Representative James Oberstar, a Minnesota Democrat, who was chairman of the House transportation committee from 2007 through 2010.

In a study by a Minnesota group backing a state gas tax, General Mills Inc. reported that for its truck fleet, every mile per hour traveled below the speed limit because of congestion or road work costs the company $2 million in late delivery charges, driver overtime and maintenance.

“What is at stake for the economy is goods move more slowly,” Oberstar said in an interview at Bloomberg’s Washington bureau today. “People spend more time in traffic than they do at their destination point.”

Investment Impact

Officials in state capitals yesterday were assessing a last-minute change in the Senate bill that could hamper efforts to use private financing to build more roads in their states. That part of the measure was “a vote for the crumbling of America,” Indiana Governor Mitch Daniels said in a statement.

“It elevates a big-government ideology over a practical need to build our roads, bridges and other infrastructure,” Daniels said. “It is a backward and senseless proposal, and we’ll urge the House to put it directly in the wastebasket of bad ideas.”

A provision written by Senator Jeff Bingaman, a New Mexico Democrat, discourages states from leasing roads to private operators, combining with other parts of the bill that limit tax breaks for companies such as Macquarie Infrastructure Co. (MIC) that operate highways for states.

Indiana in 2006 leased its turnpike for 75 years to Macquarie and Cintra, a unit of Madrid-based Ferrovial SA (FER), in the largest U.S. public-private road lease deal to date.

Chilling Effect

Virginia Transportation Secretary Sean Connaughton called the provision a “job killer” that runs against current U.S. law and exposes states to delay, uncertainty and potential litigation.

“Due to the economy, we are getting a lot of projects moving due to the lower prices,” Connaughton said. “The Senate action will stop cold those projects and their associated jobs.”

Paula Chirhart, a spokeswoman for Macquarie Group Ltd. (MQG), declined to comment.

The U.S. Chamber of Commerce, the largest business lobbying group in Washington, worked to get a highway bill passed while trying to defeat the Bingaman proposal.

The measure will have an “unnecessary chilling effect” on private investment that will disproportionately harm high-growth states like Nevada, North Carolina and Texas, Alex Herrgott, the chamber’s director of transportation and infrastructure, wrote in a March 12 note to Senate offices.

“The enormity of infrastructure needs allow that there will be room for any and all legitimate funding sources,” said Paul Yarossi, president of Kansas City-based HNTB Holdings Ltd. “New and innovative ways to deliver transportation systems can coexist with the traditional methods of delivery.”

Private Activity Bonds

Other language in the Senate bill will remove a tax break for private activity bonds. That may restrict their use to only new construction, said Daniel Matthews, co-chair of Orrick, Herrington & Sutcliffe LP’s energy and infrastructure group in New York.

“The intent is to prohibit private activity bonds from being used on an existing highway system,” Matthews said.

‘Easy to Demagogue’

At the Capitol yesterday, Democrats and Republicans in the Senate celebrated a moment of bipartisanship. Senator Barbara Boxer, the California Democrat who championed the bill, said it would preserve 1.8 million jobs and create another 1 million.

Senator James Inhofe, an Oklahoma Republican, said conservatives should be big spenders in only two areas: transportation and national defense.

“This is the kind of bill that’s easy to demagogue,” Inhofe said of Republican colleagues criticizing the legislation’s price tag. “But it will go down as one of the most significant pieces of legislation this year.”

The White House budget released in February proposed $476 billion over six years on surface transportation, with an immediate $50 billion this year.

“Maintaining a world-class infrastructure system is critical to creating an economy built to last,” White House spokesman Jay Carney said in a statement yesterday. The Senate bill “keeps Americans at work maintaining our nation’s vital infrastructure and provides states and localities the certainty they need to plan ahead.”

The most recent comprehensive surface-transportation bill, passed in 2005, allocated about $286 billion over six years. Highway programs have operated at the same spending levels since 2009.

“Presidents, Republicans and Democrats have always said you can’t have a thriving economy if you can’t move goods and you can’t move people, and you can’t do it efficiently,” Boxer said.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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