Call it a ‘D’: Reason Foundation’s Poole grades the infrastructure package

Robert Poole has long been known as the most prominent voice in the transportation world that sees the path to better infrastructure in a way that might not be too pleasing to truck drivers or fleets.

Poole, the director of transportation policy at the libertarian think tank Reason Foundation, would be expected to bring that sometimes unpopular perspective to a review of the infrastructure bill recently passed in the U.S. Senate. FreightWaves interviewed him by telephone from his home in Florida, assuming his reaction to the legislation would differ from the stream of press releases issued by transportation groups. He didn’t disappoint.

FREIGHTWAVES: Why don’t we start by having you review your basic philosophy toward funding infrastructure so we’ll be able to understand the basis for your views on the recent infrastructure bill passed by the Senate.

POOLE: It would continue to be a “user pays, user benefit” framework that started with the first gasoline tax in 1919. We have had that for 100 years. The user pays principle is ignored in this bill except for existing programs. All the new money is basically coming from borrowing or all these so-called “pay fors” that have nothing to do with transportation.

FREIGHTWAVES: Are there provisions in the legislation that you support?

POOLE: No. 1 is that the bill did put up some ground for more private investment. The trucking industry may or may not like it in every case, but given the huge infrastructure needs of the highway system, particularly rebuilding and modernizing the interstates, we are going to need private investment as part of the mix. So they increased the previous federal cap on private activity bonds [PABs] which are used in a lot of these private investment deals.

FREIGHTWAVES: How do these bonds work and why are they significant? (The cap on the number of allowable funds that can be provided by tax-exempt PAB bonds is lifted to $30 billion under the legislation, up from $15 billion).

POOLE: The bonds are intended for use by public-private partnerships. Thep problem is unless you have tax-exempt bonds, you are competing against a state agency that has tax-exempt bonds for financing. So when they do the comparison, they say, ‘Oh, the debt service cost is going to be significantly higher if we go through P3 (public private partnership).’

So Congress was finally persuaded about 15 years ago to include a pilot program for tax exempt bonds for P3 projects of $15 billion over however many years. The problem is they are all used up as of early this year. In terms of things that are good, that will help for a few years. But Maryland alone has an $11 billion program to add express toll lanes to the DC Beltway that is all to be done as a large-scale P3. The bond portion of that will probably use a third of that new allocation. It’s discrimination that there is a cap on the private activity bonds but not on municipal bonds.

FREIGHTWAVES:Does a P3 highway project need to be a toll road?

POOLE: There are two alternatives. One is a toll road, which generally would be a new revenue source. The other alternative is an availability payment. If the state contracts with a private entity for 35 years to make an annual payment of such-and-such amount, they can take the contract to the bond market. In most cases the state has to allocate a part of their existing highway funding but it’s not a new source of funding. The Port of Miami tunnel was financed that way. But the majority are financed by toll revenues, like express toll lanes added to freeways with Congressional consent.

FREIGHTWAVES: You’re disappointed that the legislation does nothing to change the Highway Trust Fund’s current operations. We know that it regularly needs new funding because of shortfalls. What would you like to have seen done?

POOLE: There are two alternative ways. I testified before the Senate Public Works Committee and I cited figures from the Congressional Budget Office that if they would use all the highway user fund money for the highway program, we wouldn’t have the big shortfall. They could fund all the other non-highway things out of the general fund. They didn’t even consider that apparently. The other way is to increase gasoline and diesel taxes. But that was considered veto bait if they did that.

FREIGHTWAVES: You entitled your analysis of the bill in your monthly newsletter “The good, the bad and the ugly.” What else is bad and ugly?

POOLE: Here’s an example of something that was intended to be good but was done badly: a federal pilot program for mileage-based user fees. There is a growing consensus in transportation that the per gallon gasoline and diesel taxes are not long-term sustainable because of the push for the electrification of transportation. So it is important to start figuring out how to do a transition.

Congress for 10 years has funded state-level pilot programs on user fees and learned a whole lot from them. One thing not to do is charge a per mile charge in addition to existing gas taxes and yet that’s what this bill does.

A federal pilot is a good idea because there are a lot of interstate commerce issues that are not really addressed in the state level pilots, like the interstate fuel tax agreement. But in the state pilots, they only paid a notional use fee and found out how much they would have paid if the user fee was in place. This program would actually send the money to the federal treasury and charge them the existing fuel taxes. They are supposed to get volunteers. But why would anybody volunteer to get paid twice in order to be part of a demonstration program?

FREIGHTWAVES: Do you expect any of these issues to be addressed in the reconciliation of the bill between the House and Senate?

POOLE: That is the best opportunity for places where there are clearly errors like the $400,00 income provision. There is a provision on P3s that would allow states to basically lease existing state enterprises like toll roads and have the value of the lease be paid up front and earmarked for other infrastructure needs. Unfortunately, the way the bill was written is that there can not be any user feed paid by households making under $400,000. So right away it takes out a big potential funding source for these kinds of programs. That section was clearly aimed at highways.

But the policy things, like using all the highway user tax money for highways and paying for other things out of the general fund, will have no chance. Maybe increasing the funds allowed by the PABs could have a chance.

FREIGHTWAVES: What overall grade do you give the legislation?

POOLE: I would perhaps say about a D. There are a few good things and many questionable things. There was a provision in the House bill to allow electric vehicle charging in rest areas on the interstates. This would be a challenge to the long-standing ban of any commercial services on the interstate highway system. It had a lot of support from environmental groups and the EV community. At the last minute, one Senator allegedly threw a fit and insisted it be removed. (Poole declined to identify the name of the Senator he heard was behind the opposition).

FREIGHTWAVES: But wouldn’t the truck stop industry, which has opposed commercialization on the interstate highways, view electric charging on the highways as the nose under the camel’s tent that could lead to even more?

POOLE: In my view it is a good thing to have the nose under the camel’s tent, because 21st century interstates need to have 21st century plazas.

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Call it a ‘D’: Reason Foundation’s Poole grades the infrastructure package

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