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The single most important event occurred in the beginning of the year with Congress and the President signing the American Recovery and Reinvestment Act of 2009 (ARRA). This bill was revolutionary in at least three ways. First, it recognized the importance of the role that transportation infrastructure plays in our economy. Second, it expanded national investment in port, freight rail, intercity rail, and high speed rail systems. Finally, it came at a time when funding for transportation projects that were under way around the country were in jeopardy of shut down due to the overall downturn in transportation fund revenues at the state, local and national level. There is no doubt that ARRA was not only badly needed to create jobs and jumpstart the economy, but that also it was necessary to keep vital transportation projects from closing, which would have had a disastrous impact on our slow climb out of the economic hole we are in.
In California, we have used our ARRA funds to respond to conditions at all levels. A significant portion of our funds are being invested by the State and local governments to respond to system maintenance, rehabilitation and repair backlogs as well as for projects that will have long term economic benefits. We were able to either advance or continue projects responding to congestion, as on Interstate 405 in Los Angeles County; goods movement and international trade, as on Interstate 905, which runs parallel to the U.S. and Mexico Border in San Diego County; and replacement of outdated and seismically deficient structures such as Doyle Drive on US 101 in San Francisco. In addition, we believe that we are well placed to make the most of any High Speed and Intercity Rail funds that are granted through the ARRA discretionary programs. Most important, as we are awarding more and more contracts, we are seeing a rise in construction sector employment.
The second most important story is the one that did not happen, which is the reauthorization of the Safe, Accountable, Flexible and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA – LU). At the beginning of the year, it appeared that we would see a major breakthrough in the next authorization, with an increase in funding, more clearly defined national transportation priorities, and greater investment in freight infrastructure. The House Transportation and Infrastructure Committee draft authorization proposal also made it clear that consideration of climate change will have strong influence over how states plan for, and select transportation projects in the future. The proposal echoed planning and project selection language that appeared in the Waxman/Markey and Boxer Kerry climate change bills. If it had been enacted, there would have been an emphasis on lowering vehicle miles traveled, which would elevate intelligent transportation strategies, transit, and rail as alternatives to business as usual.
Finally, the third story is one that is continuing to unfold. It is the reason for the first two stories and is affected by it, and that is the delicate state of the national economy and its impact on transportation habits and revenues. For the most part of 2009, federal, state, and local transportation revenues remained well below that of previous years. However, as conditions seem to be improving, we are beginning to see a minor uptick in vehicle miles traveled (VMT). Normally, we would expect that a rise in VMT would be accompanied by a proportional rise in revenues. However, it appears that people are resorting to more fuel-efficient vehicles for travel, and businesses have learned how to maximize the efficiency of their fleets, which is depressing fuel consumption and consequently, fuel tax revenues. In other words, it is starting to look like there has been a fundamental shift in the national psyche towards frugality and efficiency’ which is going to affect how we finance and fund transportation needs.
At this point, it is looking like we will see a general improvement in the economy in 2010. However, it appears that we will not have an immediate return to the robust economy of a few years ago. This means that it is likely that we will be tempted to take a "ginger" approach to how we respond to transportation issues, because of concerns over modest revenues and fears that implementing any new funding sources might slow growth. Nevertheless, because transportation system efficiency and the quality of our infrastructure have such a high level of economic effect, we are going to need to address some form of legislation, be it a full authorization, or a transitional hybrid/authorization bill that will need to address at least the following three policy issues in the next year:
1. Revenues:
The next bill will have to take a serious look at revenue streams both existing and proposed, and evaluate them for technical feasibility, impact to the economy, and potential fund levels. More importantly, we are going to have to take the bold steps of implementing those types of revenue streams that have the greatest overall benefit. The year 2009 taught us at least two lessons; one, the fuel tax is not going to be an effective resource forever; and two, our ability to borrow against future revenues is becoming more limited. This means that we are going to have to adopt alternatives that will be stable in a backdrop of increased fuel efficiency and use of alternative fuels, and reduced vehicle miles traveled. It also means that government alone is not going to solve the problem and as part of this policy shift, we are going to have to work on improving our ability to collaborate with the private sector. Finally, we need to return to a pay as you go environment to prevent these new revenue streams from being consumed by debt payment.
2. Delivery:
We must improve the efficiency by which providers can deliver transportation projects and services, with an eye towards reducing the time between planning and ribbon cutting or service start. We are probably living in the most dynamic and competitive times ever experienced on this planet. Change in business processes is almost instantaneous and we are competing on equal footing with almost every other nation for resources, technology, and jobs. Our industries are adapting to this highly dynamic environment by being nimble and creative and by carefully targeting their investments. We must be able to ensure that we can be timely in our support of their decisions or risk losing more jobs overseas. This means that we need to look with a critical eye not only at the projects that we are choosing, but also at the methods that we employ to plan for and deliver them to ensure that we are able to respond to rapid economic change. We can no longer afford the luxury of the sixteen or so years it currently takes to plan, design, and build a major transportation project.
3. Technology and Innovation:
It is imperative that we increase our focus on research and development on transportation technologies. There are multiple benefits in this strategy. First, it is the most promising area for addressing climate change through increased efficiency in the way we use our system; reduced emissions from the materials, equipment and processes we use to build it; and development of new technologies to support alternative modes of travel. Second, it is a wellspring for the new "green" industries that we are depending upon to create the next wave in our economy. Finally, it is a longer-term investment that fosters the kinds of jobs that bring about the innovative thinking through basic research that we need in order to remain a leader in the global economy. It is not something we can afford to neglect.
The last decade had many watershed moments. September 11, 2001 forever changed how we consider the security of our transportation system. 2008 made us realize that our economy is more fragile than we had thought and that growth in VMT is not going to continue forever. 2009 showed us that investment in transportation can be a very effective tool for stimulating our economy. I believe that 2010 has great potential for being the next turning point for transportation and if we can be bold in the actions we take; it will be.
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