Bloomberg News

Obama Sends $302 Billion U.S. Highway-Work Bill to Congress (1)

April 29, 2014

The Obama administration sent to Congress legislation that would provide $302 billion for road and transit projects over four years, a measure needed to keep the U.S. Highway Trust Fund from running dry.

The Transportation Department proposal would boost the highway fund $87 billion above current levels to generate more money for deficient bridges and aging transit systems. The bill also addresses the General Motors Co. (GM:US) ignition-switch recall by raising almost 10-fold to $300 million the maximum fine on carmakers that fail to quickly recall deficient vehicles.

Congressional transportation leaders in both parties have said they want to pursue six-year measures, though there is little consensus on how to finance the proposals. The Transportation Department has said the Highway Trust Fund -- which relies on gasoline and diesel-fuel taxes -- may not be able to meet its obligations as soon as this year. That risks leading states to slow or halt work in a recovering economy.

“We need to pass a bill that avoids the destructive collapse in funding that would threaten hundreds of thousands of jobs and inflict unnecessary damage on our economy,” Transportation Secretary Anthony Foxx said on a conference call with reporters today.

The funding proposal is in line with President Barack Obama’s February budget request. House and Senate panels are drafting their own bills and there are no plans in Congress to consider the president’s proposed way to help pay for it: a temporary tax increase on overseas earnings by companies.

Financing Options

Foxx said his proposal will create “millions of new jobs.” The financing approach could catch hold after House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, also proposed a similar tax boost on businesses to fund highway construction, Foxx said.

The proposal also includes a provision raising the civil penalties for automakers failing to act quickly on vehicle recalls. House and Senate committees are probing GM’s recall of 2.59 million cars for an ignition-switch defect now linked to the deaths of 13 people and may later advance legislation boosting the current civil penalty maximum of $35 million.

“We do feel like the penalties could be set higher to ensure when a violation occurs it is more than a rounding error,” Foxx said.

David Friedman, the acting administrator of the National Highway Traffic Safety Administration, said the measure also will give the federal government new authority to require removal of the cars when a defect is first discovered, and mandate that rental car companies comply with recalls.

Six-Year Measures

Senator Barbara Boxer, chairwoman of the Environment and Public Works Committee, said this month she is preparing a six-year measure to provide the same amount of money annually as the current two-year, $105 billion bill expiring in September, plus inflation. The California Democrat said the bill won’t address funding, and she said she hopes an agreement on that can be worked out within a few months.

Lawmakers in both parties say there aren’t enough votes in Congress to raise the nation’s 18.4-cent-per-gallon gas tax to finance a bill. The chairmen of congressional tax-writing panels say they’re considering a short-term infusion into the trust fund to buy more time. Today, House Transportation and Infrastructure Committee Chairman Bill Shuster said discussions on that are still in progress.

“It appears that the trust fund is going to run out of money in July, so we’re talking with leadership trying to figure out how to get over that hump,” Shuster, a Pennsylvania Republican, said in an interview.

A Crumbled Effort

A six-year highway proposal made in 2012 crumbled amid disputes over how to pay for it. Congress settled on the two-year measure that used general tax revenue to keep construction going. Business groups say a longer-term measure could boost the economy while benefiting construction companies like Caterpillar Inc.

Today’s DOT proposal reflects an administration that is stepping up pressure for action, and also playing up an election-year debate on jobs and federal infrastructure. The legislation comes from an administration that has often left it to Congress to work out details of plans, never proposing its own version of the Affordable Care Act and a response to the National Security Agency’s controversial surveillance work.

Eight States

Foxx this month conducted a bus tour across eight states in five days to call for a long-term highway measure and to draw attention to important road and bridge projects. He visited Louisville, Kentucky, to tout a $2.34 billion Ohio River Bridges project, calling it “an example for our nation” of the sort of job-creating infrastructure investment Congress could nudge forward, and stopped in Garland, Texas, to highlight a $1.5 billion freeway project.

“Projects like the I-635 LBJ Freeway East will not only create jobs, but also lay the foundation for long-term economic growth for entire regions and industries,” Foxx said during the stop in Garland.

Those two states also are home to the Senate’s two top Republican leaders -- Mitch McConnell of Kentucky and John Cornyn of Texas -- both of whom are on the ballot this fall.

Caterpillar, Honeywell

With the summer construction season looming, outside groups also are making the case for consensus on financing and policy priorities. Caterpillar and four other U.S. companies in March formed the Alliance for American Competitiveness to help lobby for a long-term bill. Led by Caterpillar Chairman Doug Oberhelman and former Mississippi Governor Haley Barbour, the group also includes Honeywell International Inc., United Parcel Service Inc., Dow Chemical Co., and BNSF Railway Co. as founding members.

On April 24, the American Road and Transportation Builders Association released a report based on DOT data that showed 63,000 U.S. bridges need structural repair, all the types of projects that would be affected if the trust fund’s looming insolvency cause a slowdown in payments to states, as projected by the agency.

Cars, trucks and school buses drive over those bridges 250 million times a day, the group says. Alison Premo Black, the group’s chief economist, said state and local governments don’t have the resources to fill any funding gap.

“There’s only so much state and local governments can do with very, very limited resources,” she said.

Generating Debate

Companies also are warning of the potential impact on employment. Mike Cegelis, a senior vice president of Coraopolis, Pennsylvania-based American Bridge Co., said that as many as 20 percent of the construction company’s 1,200 workers have jobs that are at risk if federal payments slow.

“Transportation infrastructure underpins our economy,” Cegelis said in an ARTBA conference call with reporters.

A top lobbyist for the U.S. Chamber of Commerce said the administration’s move could help jump-start the debate.

“Having a concrete proposal from the administration is a positive step forward in the reauthorization process,” said Janet Kavinoky, who tracks transportation policy at the Chamber. “It generates important debate and discussion, and it highlights the fact that as a country we must not only look at our immediate problem -- the solvency of the Highway Trust Fund in 2014 and 2015 -- but also at how we meet the economic needs of the country on a multimodal basis in the long run.”

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editors responsible for this story: Romaine Bostick at rbostick@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman


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