Surface Transportation - Finance Context & Issues


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Ron Epstein
Chief Financial Officer
NYS Department of Transportation

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  • From 2005 to 2010, New York will deliver the most robust capital construction program in the history of our State. The capital program will repair and rehabilitate the State’s aging bridges, roadways, and public transit systems…..enhance safety and security…..and strategically invest in projects that will promote economic development and job creation. From the 15.246 billion that is allocated to highways and bridges – the 15.246 is broken-down as the following: 1.472 for Mobility 1.715 for Safety 0.472 for operations 4.933 for highway main/ 3.999 Br Main/ SOGR 0.209 RR/Transit 0.368 Bike/Ped 2.078 Program Admin (Other 05-10 broad Talking points include) $2.9 Billion from the Bond Act DOT/Thruway/MTA Five year programs total over $38 Billion Largest and most robust capital construction program in the history of NYS
  • High levels of debt service payments have burdened the State’s Dedicated Highway and Bridge Trust Fund and consumed revenues that could otherwise be used for pay for capital projects and operations. It is estimated that by 2013, debt service payments will consume three quarters of the Dedicated Fund’s annual revenues. The Governor’s Executive Budget begins the process of addressing the capital program’s reliance on debt issuance by reducing $412 million from planned levels, lowering debt service payments from the Trust Fund for many years to come.
  • Ensuring Highway Trust Fund Stability Let me take a moment to comment on the status of the Highway Trust Fund revenue. FHWA has begun posting the month to month data What’s clear from this data is that the cash balance trajectory for this year is much worse than in the prior years. In fact it is not a question of whether we will face a payment slowdown but at what point (Note: that could be late July or early August) We are discussing actions to address the issue.
  • Ensuring Highway Trust Fund Stability The cash situation in the Highway Trust Fund remains grim. As you can see from the first chart, the receipts coming into the HTF so far this year is showing a dip compared to what the Congressional Budget Office is predicting just a few months ago. In fact, receipts are running at 90% of the amount coming in this time last year. On the other hand, outlays are running at 105% of the amount going out during this time last year. This imbalance will have significant cash flow implications most likely later this federal fiscal year.
  • Status of the Highway Trust Fund May 2009 Based on current spending and revenue trends, the U.S. Department of Transportation (DOT) estimates that the Highway Account of the Highway Trust Fund (HTF) will encounter a shortfall by August 2009 . The Highway Account of the HTF began the year with approximately $10 billion in cash. The surface transportation program continues to outlay at a greater pace than receipts are coming in. As a result, the cash balance has dropped by several billion dollars in the past few months. As of April, the Highway Account cash balance was $5.8 billion . Based on the FY 2010 President’s Budget estimates released in May, and assuming the economic situation stays as projected, by August, FHWA is estimating that there will be insufficient funds in the Highway Account of the Highway Trust Fund to cover bills when they are presented for payment. DOT estimates that around $5-7 billion will ultimately be needed to address the shortfall for FY 2009. Based on financial history, a prudent balance of $4 billion in cash is needed in the Highway Account in order to pay all bills and manage the cash flow . Assuming baseline projections from the FY 2010 President’s Budget, in addition to the $5-7 billion in FY 2009, DOT is currently estimating that it will need an additional $8-10 billion to cover the shortfall in the Highway Account of the Highway Trust Fund in 2010. This assumes the current economic situation stays as projected. Note: the Mass Transit Account of the Highway Trust Fund will not encounter a shortfall until 2010.
  • FHWA $5 billion for Federal-aid subject to limitation $739 million Federal-aid exempt from limitation $550 million FMCSA $762 million HTF-supported NHTSA -------------------------- $7.051 billion TOTAL
  • While the gas tax is expected to remain the backbone of the highway trust fund, we must begin looking for new sources of revenue.
  • Highlights from the Final Report of the National Surface Transportation Infrastructure Financing Commission Together these short-term measures to increase the Highway Trust Fund revenue will: Generate additional $20B annually Recapture purchasing power lost since last increases Close 30-40% of combined federal funding gap Enable continuation of current program spending levels Cost typical household $9 per month ($5 per vehicle, ½ ¢ per mile) for gas tax increase, additional increment for freight charges passed through
  • Implications of the Final Report of the National Surface Transportation Infrastructure Financing Commission Furthermore, the VMT fee can charges at state and local level as well for: Congestion Emissions Axle weight Tolled facilities Transit fares
  • Highlights continued: Tolling and Other Direct User Fee Initiatives Allow Interstate tolling for all new capacity and for existing capacity under certain circumstances Residual revenues for surface transportation Tolling standardization and pricing information for travelers Federal Assistance, Financing Incentives, Tax Policy Enhance federal credit (TIFIA) and State Infrastructure Banks Additional financial incentives for user-backed projects Targeted tax subsidies (private activity bonds, tax credit bonds) Private Sector Financial Participation (PPPs) Facilitate private investment where it adds value Ensure appropriate controls to protect public interest Support state oversight of PPP arrangements
  • Surface Transportation - Finance Context & Issues

    1. 1. Surface Transportation - Finance Context & Issues New York Public Transit Association Spring Meeting Innovation, Sustainability, Public Transit Glens Falls, New York June 12, 2009
    2. 2. Session Objectives <ul><li>Provide a status on: </li></ul><ul><ul><li>ARRA </li></ul></ul><ul><ul><li>State Dedicated Highway and Bridge Trust Fund </li></ul></ul><ul><ul><li>Next Five-Year State Transportation Plan </li></ul></ul><ul><ul><li>Federal Highway Trust Fund </li></ul></ul><ul><ul><li>Authorization </li></ul></ul><ul><li>Discuss some of the alternative revenue/funding options being discussed </li></ul><ul><li>To provide a framework for the future/jumping off point for Rick </li></ul>
    3. 3. ARRA Programs and Funding <ul><li>Highways- $27.5 billion/NYS share - $1.1 billion </li></ul><ul><li>Transit- $8.4 billion/NYS share - $1.3 billion (formula)/ </li></ul><ul><ul><li>$274.3 million New Start (discretionary) </li></ul></ul><ul><li>Rail- discretionary grants available </li></ul><ul><ul><li>$8.0 billion for High Speed Rail/State Capital Projects/NYS share - TBD </li></ul></ul><ul><ul><li>$1.3 billion for Amtrak </li></ul></ul><ul><li>Aviation- $1.3 billion in discretionary grants/NY share - $30.5 million </li></ul><ul><li>100 percent federal </li></ul>
    4. 4. How are we doing? - ARRA Progress
    5. 5. Planned Infrastructure Accomplishments Under ARRA <ul><li>Based on Section 1511 Certifications 1-6/174 projects totaling $523 million (ARRA STIP $ amounts) </li></ul>
    6. 6. What Does This Mean?
    7. 7. Rural Public Transportation ARRA Update <ul><li>$26.3 million available for projects in non-urbanized areas </li></ul><ul><li>State applies on behalf of rural sponsors </li></ul><ul><li>Department solicited projects from municipal sponsors this past Spring </li></ul><ul><li>Have recommended funding for projects in 36 county, city and authorities and 5 intercity carriers representing over 80 different projects </li></ul><ul><ul><li>79% of funding will be used for buses/other vehicle replacement </li></ul></ul><ul><ul><li>21% will be for other projects including construction, ITS, shelters, signs and fareboxes </li></ul></ul>
    8. 8. State Dedicated Highway and Bridge Trust Fund
    9. 9. NYSDOT’s Five-Year Capital Program - 2005-2010 $17.958 Billion from 4/1/05 to 3/31/10 Highways and Bridges $15.246 Billion Industrial Access $0.045 Billion CHIPS/Marchiselli $1.681 Billion Multi-Modal Program $0.350 Billion Rail/Ports $0.235 Billion Aviation $0.116 Billion Upstate Transit $0.235 Billion Canals $0.050 Billion Total $17.958 Billion
    10. 12. DHBTF Debt Service…
    11. 13. ) 20 Year Transportation Capital Needs (2007 $ in billions)
    12. 14. Next Five-Year State Transportation Plan <ul><li>Current NYSDOT multiyear capital program expires in March of 2010. MTA’s 5 year plan expires in December of this year. </li></ul><ul><li>Recent legislation addressing MTA financing requires the Department to begin immediately to develop the next multiyear program </li></ul><ul><li>Requires objective and performance measures for this program to be submitted to the Governor and Legislature by October 1, 2009. </li></ul><ul><li>The Department’s plan also addresses the needs of systems other than the MTA. </li></ul><ul><li>We intend to start immediately, as the Governor and Legislature have directed us, to begin to develop our next multiyear, multimodal program. </li></ul>
    13. 15. Next Five-Year State Transportation Plan <ul><li>We need the help of NYPTA/MPOs/local officials to articulate the need for greater transportation infrastructure investment. </li></ul><ul><li>We envision an extensive outreach effort, similar to that undertaken for ARRA funding, to identify the broad spectrum of transportation needs across the state. </li></ul><ul><li>The transportation sector needs to reach out beyond our traditional partners to advocate for greater transportation investment, </li></ul><ul><li>We are at the beginning of thinking through our strategy to meet the legislative requirement for a new program. </li></ul><ul><li>You have my assurance that the Department will continue to work cooperatively with the public transportation industry as move forward on all these activities. </li></ul>
    14. 16. Federal Funding is Key for Capital Program <ul><li>Federal funds comprise 50% of highway capital budget </li></ul><ul><li>Federal funds comprise 25% of transit capital budget </li></ul>
    15. 19. Source: Federal Highway Administration
    16. 22. Solvency of the Mass Transit Account
    17. 23. Source: The Fiscal Year 2010 Appendix of the Federal Budget
    18. 24. The Future of Surface Transportation <ul><li>The good and bad news </li></ul><ul><ul><li>The good news: a high priority given to infrastructure </li></ul></ul><ul><ul><li>Authorization is underway and we have excellent Congressional leadership </li></ul></ul><ul><ul><li>The bad news: The Highway Trust Fund is going broke </li></ul></ul><ul><ul><li>There is no support for increasing user fees </li></ul></ul><ul><ul><li>There are many competing goals at the national level </li></ul></ul>
    19. 25. Needs <ul><li>Nationally, meeting only about 1/3 of roughly $200 billion required each year to maintain and improve the system </li></ul><ul><li>At federal level, also meeting only about 1/3 of needs – we face a $400 billion federal funding gap over next 6 years under current policies and revenues </li></ul>
    20. 26. Financial Outlook - Challenges for 2011-2015 <ul><li>No easily identifiable funding source to increase transportation resources </li></ul><ul><ul><li>Increase or index gas tax </li></ul></ul><ul><ul><li>Identify new tax/user fee revenue </li></ul></ul><ul><ul><li>Use General Fund revenue </li></ul></ul>
    21. 27. Structural Problem <ul><li>The current path is unacceptable </li></ul><ul><li>System demands are outpacing current investments </li></ul><ul><li>Fuel tax-based funding approach is insufficient at current rates </li></ul><ul><li>Sustainability of fuel taxes is eroding quickly and unlikely to follow smooth path, with technology advancement and determination to address global climate change </li></ul><ul><li>In the short term, feasible options are limited </li></ul>
    22. 28. Future Revenue Collection <ul><li>The current system relies on fuel taxes </li></ul><ul><li>We have seen a marked decline in revenues </li></ul><ul><li>Two National commissions have called for short and long-term solutions </li></ul><ul><li>VMT collection systems have come to the forefront of options to consider </li></ul>
    23. 29. National Surface Transportation Infrastructure Financing Commission <ul><li>Short-term Recommendations </li></ul><ul><li>Maintain/strengthen integrity of the Highway Trust Fund </li></ul><ul><li>Increase existing HTF revenue sources: </li></ul><ul><ul><li>Modest increases in fuel taxes (10 ¢ for gas, 15 ¢ for diesel) </li></ul></ul><ul><ul><li>Increase (double) the Heavy Vehicle Use Tax (HVUT) </li></ul></ul><ul><ul><li>Maintain existing tractor/trailer sales tax and truck tire tax </li></ul></ul><ul><ul><li>Index motor fuels tax, HVUT, and truck tire excise tax </li></ul></ul>
    24. 30. National Surface Transportation Infrastructure Financing Commission <ul><li>Begin VMT Transition </li></ul><ul><li>Begin transition as soon as possible; 2020 as implementation goal </li></ul><ul><li>Set federal fee at level to fund federal share of needs (approx. 2¢ per mile for autos under current policies and estimates) </li></ul>
    25. 31. National Surface Transportation Infrastructure Financing Commission <ul><li>Non-Federal Investment Options </li></ul><ul><li>Tolling and Other Direct User Fee Initiatives </li></ul><ul><li>Federal Assistance, Financing Incentives, Tax Policy </li></ul><ul><li>Private Sector Financial Participation (PPPs) </li></ul>
    26. 32. NYS Position - Funding <ul><li>Strong federal role </li></ul><ul><li>Double federal funding to $575 billion </li></ul><ul><ul><li>Highways- $375 billion </li></ul></ul><ul><ul><li>Transit- $123 billion </li></ul></ul><ul><ul><li>Freight- $42 billion </li></ul></ul><ul><ul><li>Intercity Passenger Rail- $35 billion </li></ul></ul><ul><li>Diversified portfolio of revenue </li></ul>
    27. 33. NYS Position - Fix it First <ul><li>Bridge Program </li></ul><ul><li>Transit Program </li></ul><ul><li>CMAQ </li></ul><ul><li>Projects of National and Regional Significance </li></ul><ul><li>Interstate Reconstruction </li></ul>
    28. 34. NYS Position - Transit <ul><li>Retain Transit as a stand-alone program </li></ul><ul><li>Support APTA program consolidation </li></ul><ul><ul><li>Simplifies Fixed Guideway program </li></ul></ul><ul><ul><li>Meets the needs of the oldest and largest systems </li></ul></ul>
    29. 35. NYS Position - CMAQ <ul><li>Retain as a stand-alone program </li></ul><ul><li>Continue emphasis on air quality </li></ul><ul><li>Extend time period to use CMAQ for operations beyond three years, as long as net air quality benefit can be demonstrated </li></ul>
    30. 36. NYS Position - Policies <ul><li>Align Transportation, Energy, and Climate Change Policies </li></ul><ul><ul><li>NY has lowest per capita gas consumption of any state </li></ul></ul><ul><ul><li>Equity Bonus rewards gas consumption </li></ul></ul><ul><ul><li>Equity Bonus is now the largest highway program </li></ul></ul><ul><ul><li>Need a new approach </li></ul></ul>
    31. 38. Questions…? <ul><li>Ron Epstein, Director </li></ul><ul><li>Office of Finance </li></ul><ul><li>New York State Department of Transportation </li></ul><ul><li>50 Wolf Road </li></ul><ul><li>Albany, New York 12232 </li></ul><ul><li>(518) 457-8362 </li></ul><ul><li>[email_address] </li></ul>