United States: Federal Surface Transportation Reauthorization: The Road Ahead

With the expiry looming of the current federal authorization for US surface transportation funding, the Obama Administration recently submitted a bill to Congress (the "Grow America" Act) proposing a four-year reauthorization and containing several programmatic modifications. The Senate is currently working on a proposed bill (expected to be introduced this week) and a House bill is expected to follow. We summarize below the key elements of Grow America, congressional activity to date relating to a new bill, and specific surface transportation financing options that are likely to be discussed among stakeholders.

The most recent reauthorization of federal funding for US surface transportation, the Moving Ahead for Progress in the 21st Century Act ("MAP-21")1, which was signed into law by President Obama in July 2012, will expire on September 30th of this year. In addition, the Highway Trust Fund (the "HTF"), the source of most federal funding to the states for highway improvements, is projected by the US Department of Transportation ("US DOT") to be insolvent by the end of August of this year unless congressional action is taken to avert it.2

The Obama Administration and Congress are taking steps to avoid such an expiration and insolvency. On April 29th, US DOT, on behalf of the Obama Administration, submitted a draft $302 billion bill to Congress in order to jump start the legislative process. Called the Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency, and Rebuilding of Infrastructure and Communities throughout America Act (hereunder "Grow America"), the proposed bill is generally consistent with the reauthorization plan the President presented this March in connection with his FY 2015 budget request3. The Senate's Environmental and Public Works Committee is set to release a draft reauthorization bill as early as today, and a House bill is expected to follow4. Given that this is an election year and MAP-21 only passed after nine extensions to the then-existing program, it will be challenging to pass a new reauthorization bill before the elections. In the absence of a formal reauthorization, Congress would nevertheless need to act promptly to extend MAP-21 and provide additional funding to the HTF.

Below we outline the key elements of Grow America, congressional activity to date relating to a new bill, and some of the financing options that are likely to be discussed among stakeholders in the coming months in connection with the reauthorization to meet the states' highway improvement needs.

Key Elements of Grow America

Grow America includes a four-year reauthorization that would increase funding for highways, bridges, transit and rail systems. The proposed bill seeks to regularize funding across multiple modes of transportation by changing the HTF to a Transportation Trust Fund, which would fund highways, transit and intercity rail as well as the Transportation Investment Generating Economic Recovery ("TIGER") grant program. As in the President's budget proposal, Grow America provides for about half of the cost of the bill to be covered by using $150 billion in transition revenue from corporate tax reform.

Grow America would permit (i) existing, toll-free lanes of Interstate highways to be tolled for purposes of reconstruction and (ii) toll-free highways, including Interstates, bridges and tunnels to be tolled as "managed lanes" for the purpose of mitigating congestion. These developments would constitute a significant expansion of the states' authority to raise revenue through tolling to fund needed improvements. To date, tolling of existing toll-free Interstates has been prohibited except pursuant to a pilot program that permits up to three Interstates to be tolled for reconstruction purposes and pursuant to MAP-21, which permits tolling of new lanes (on Interstates and other highways) if the number of non-tolled lanes is not reduced5. Under Grow America, US DOT would be required to approve any such new tolling.

The proposed bill also would expand the permitted uses of toll revenues by states to include, in addition to highway uses, improvements in public transit services that either operate within the corridor of the tolled facility or contribute to the improved operation of the toll facility. Toll revenues could also be used to mitigate the adverse effects of tolling that are identified in the environmental review process, as well as for certain other purposes subject to the relevant public authority certifying that the tolled facility is being adequately maintained.


1 Moving Ahead for Progress in the 21st Century Act, Pub. L No. 112-141, 126 Stat. 405-988 (2012).

2 Highway fund bankruptcy now projected for August, THE HILL (Apr. 15, 2014, 2:08 p.m.), http://thehill.com/policy/transportation/203586-dot-moves-up-highway-trust-fund-bankruptcy.

3 For the full bill, see http://www.dot.gov/sites/dot.gov/files/docs/DOT_surface_reauth-FINAL.pdf . For a section-by-section summary, see http://www.dot.gov/grow-america. For an overview, see GROW AMERICA: An Overview Fact Sheet, http://www.dot.gov/grow-america/fact-sheets/overview (hereinafter Grow America Fact Sheet). For an overview of the President's FY 2015 budget proposal, see The White House, Opportunity for All: The President's Fiscal Year 2015 Budget, http://www.whitehouse.gov/omb/overview (hereinafter FY 2015 Budget Overview).

4 Keith Laing, Senate schedules highway bill markup, THE HILL (May 8, 2014, 2:19 p.m.), http://thehill.com/policy/transportation/205620-senate-schedules-highway-bill-mark-up .

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