NAIOP support helped lead to the passage of a long-term transportation bill, the FAST Act, that will fund U.S. highways and transit systems for the next five years.
TRANSPORTATION AND infrastructure investments are largely considered the lifeblood of commercial real estate development. Whether one is discussing port congestion and intermodal strategies for industrial properties, highways and roads connecting suburban office parks or transit-oriented development in and around urban centers, transportation funding — or the lack thereof — often determines the viability and ultimate success of real estate projects around the U.S.
One top priority for NAIOP in 2015 involved increasing our lobbying efforts to support a long-term transportation reauthorization effort that incorporates all modes of transportation investments. Working alongside other transportation advocates, including state and local officials, contractors, road builders and other business interests, we kept up pressure on Congress to pass meaningful legislation. Although most members of Congress agreed that funding the nation’s infrastructure should be a top priority, determining how to pay for that investment had previously proved elusive.
The last long-term transportation bill was enacted over a decade ago. Since then, we have been operating on a series of extensions, with the intervening exception of a two-year bill passed in 2012. In the meantime, improvements to the nation’s transportation system have been woefully inadequate. The American Society of Civil Engineers gives America’s infrastructure a grade of D+. With reports of bridges and roads crumbling across the country, Congress still refused to act; legislators were afraid to take a tough vote that would be construed as raising taxes on their constituents. In the meantime, the U.S. Chamber of Commerce reported that a decaying transportation system costs our economy more than $78 billion in lost time and fuel. The lackluster response to that news was a dramatic increase in road repaving.
At the center of the controversy was the insolvency of the Highway Trust Fund. That fund relies almost exclusively on the federal gas tax, which has not been increased since 1993. (Standing at 18.3 cents per gallon, it would have been increased to 30 cents per gallon if it had been indexed to inflation.) The appetite for increasing that tax was nonexistent in the Republican-controlled House, and few Democrats were willing to take a hard stance in the Senate.
As 2015 drew to a close, few had confidence that Congress would rise to the challenge on the eve of an election year, despite the pressure of the looming expiration of the transportation reauthorization bill. However, NAIOP and its allies kept up the lobbying pressure and continued to press for a long-term bill with adequate funding. Despite the long odds of Congress acting, at the last minute a deal was struck.
On December 4, 2015, President Obama signed into law PL 114-94, “Fixing America’s Surface Transportation Act,” commonly referred to as the FAST Act. The act will fund the nation’s highways and transit systems for the next five years. With a price tag of $305 billion, the funding mechanisms that pay for such a huge endeavor are not without controversy.
Without raising the gas tax, and having to comply with PAYGO (Statutory Pay-As-You-Go Act of 2010) rules that require an offset with savings from existing funds for any funding not raised by taxes, Congress took a creative approach to overcoming the financial difficulty. The FAST Act required an immediate transfer of $70 billion from the General Fund to the Highway Trust Fund. Congress offset the expenditure by raiding the Federal Reserve’s surplus fund and reducing the dividend that the government pays to certain banks. Many doubted that these changes would ultimately prove adequate to offset the amount needed. On the House floor, the popular position was to support the bill, but many still decried the raised revenue as a funding gimmick.
Despite the controversy, the FAST Act is a huge step in the right direction. Although it is not perfect, the benefits of a fully funded act far outweigh the alternative of relying on another series of short-term extensions. The act will allow state and local governments to better plan for future transportation needs. It increases federal highway investment by 15 percent from current levels. The increased investment that was thought to be unattainable just a few weeks prior to the bill’s enactment is now enshrined into law. Whether or not an additional transfer of funds from the general coffers will be needed to continue to shore up the Highway Trust Fund will not be fully understood for at least a few years. The bottom-line conclusion is that we finally have a transportation act that will go a long way to invigorate the commercial real estate industry.