Harvey Hammond, chairman of HNTB Corp., was talking about the firm's future as it marks its 100th anniversary this year—as well as the future of funding improvements to the nation's bridges, railways, ports, tunnels and major highways. "The infrastructure needs and demands will always be there," he says. "The question is: How do we respond to [them]?"
For U.S. states and infrastructure managers who are puzzling over how to pay for upgrades to many of these aging systems, it's the question of the moment.
Amid an era of partisan gridlock in Congress over spending priorities, budget shortfalls and infrastructure systems that need attention, state legislatures and owners are filling funding voids with novel project delivery approaches, using technology tools better and finding custom funding mixes to get projects moving again.
The trend goes beyond the growth of public-private partnerships, which more states have embraced in recent years. More state and local municipalities are using alternative delivery mechanisms, including design-build and construction management-at-risk. They are taking on the politically treacherous matter of raising local user fees and taxes for transportation projects. And they are looking more holistically at their systems in terms of the assets' life cycle, thanks in part to the federal MAP-21 legislation's mandate to embrace more technology, such as building-information-modeling tools for asset management.
"Flexibility, a simplified structure and emphasis on performance-based planning and monitoring has helped spur interest in regional planning," says Diana Mendes, senior vice president and Chesapeake district general manager with AECOM. "Metropolitan planning organizations and transit agencies now have a seat at the table and participate in regional-scale planning rather than [piecemeal] projects. We're past the mode wars. There's no silver bullet in 'more highways' or 'more transit.' "
The federal government must still provide the backbone of funding for transportation, experts say, even though they also agree that raising the federal fuel tax remains a non-starter in Congress. Other ideas are circulating, such as infrastructure banks and fees for vehicle miles traveled.
"There are new revenue streams we could create. For example, the concept of a carbon tax makes sense," says Joshua Schank, president and CEO of the Eno Center for Transportation, a non-partisan think tank. "There's some strong consensus around the idea that having the federal government give out loans for transportation investments makes sense. The problem is, with infrastructure banks, there is a discussion of grants as well as loans. Who is going to get that money? Even with loans, there is a lot of concern on the part of rural areas saying their projects won't benefit."
While states are increasingly deploying public- private partnerships as a financing solution for key projects, P3s can't solve everything. "Over the last 15 to 16 years, there have been some 27 states that, through gas taxes or bonds or whatever, increased their revenues," says Allison Premo Black, chief economist for the American Road & Transportation Builders Association. "But it does not change the importance of federal aid to most states."
That said, Shank notes that Congress is likely to reauthorize the MAP-21 legislation, which was slated at $105 billion for 2013-14, but not the multiyear bill the industry wants. "There's no emergence of a Congressional consensus required to order lunch, let alone a dedicated source of funding," he says.
Loans And Bonds
MAP-21 expanded the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program by $122 million to $1 billion from fiscal year 2013 to 2014, and demand for the low-interest, 35-year-maximum loans to finance projects exceeds supply.