The Fixing America’s Surface Transportation (FAST) Act, a bipartisan five-year surface transportation bill, passed by large majorities in both the House (359-65) and Senate (83-16) and was signed by President Obama in December 2015. In passing the FAST Act, Congress made a commitment to five years of federal funding for infrastructure, at modestly higher levels. Yet the U.S. is still grappling with a growing need to build and maintain critical infrastructure without sufficient funding to do the job. Encouraging private investment in infrastructure is part of the solution. And in achieving that goal, public-private partnerships (P3s) are a proven tool. The FAST Act will shape, both positively and negatively, the role of private investment in infrastructure projects over the next few years and beyond, with substantive changes beyond just the top-line funding numbers. Here’s a rundown of the ten biggest impacts of the legislation:
1. Expedites Permitting and Environmental Review
The FAST Act requires the U.S. Department of Transportation (USDOT) to lead an effort to develop coordinated and concurrent environmental reviews across federal agencies for major transportation projects. And a new Federal Permitting Improvement Steering Council, made up of a presidentially-appointed executive director and staff from relevant federal agencies, will develop recommended schedules for different types of permitting and reviews, work with agencies to coordinate processes, and maintain an online Permitting Dashboard to track the status of projects in the review and permitting process. This latter effort applies to more than just transportation, encompassing energy, pipeline, broadband, and water projects that cost more than $200 million. By reducing project delivery time and delays, these provisions could make private investors more comfortable with investing in U.S. projects. Also included is a new pilot program that would allow up to five states to use their own laws and regulations for environmental review rather than those under the National Environmental Policy Act, which is designed to help projects avoid duplicative requirements in the permitting process.
2. Creates a One-Stop Shop for Credit Assistance
The FAST Act creates the National Surface Transportation and Innovative Finance Bureau at USDOT to serve as a one-stop shop for credit assistance programs, directed to coordinate and streamline federal reviews and permitting and provide technical assistance. The Bureau appears to be modeled in the same vein as the Build America Transportation Investment Center, launched in September 2015, but is now authorized in statute to safeguard its future. The law also creates a new Council on Credit and Finance Assistance to streamline the application process for TIFIA and other credit programs.
3. Slashes TIFIA by 70 Percent
Transportation Infrastructure Finance and Innovation Act (TIFIA) financing is the main government program supporting P3s, in addition to other publicly-financed infrastructure projects. Yet the FAST Act cut TIFIA from an authorized level of $1 billion in FY 2015 to $275 million in 2016 and 2017, $285 million in 2018, and $300 million in 2019 and 2020. This severely limits one of the most cost effective tools for building infrastructure projects. The FAST Act does give states the authority to use other federal grant funds to pay for the TIFIA subsidy (essentially allowing projects in the state to use TIFIA’s financing provisions without tapping into the amounts specifically allocated for TIFIA), but it is unclear whether any state would choose to use grant funds for that purpose.
4. Supports P3 Offices and State Infrastructure Banks
The FAST Act restores a state’s ability to use up to 10 percent of its allocated federal highway funds to capitalize a state infrastructure bank. States had this authority under the 2005 SAFETEA-LU law, but it was not continued in MAP-21 in 2012. In addition, surface transportation program funds, the most flexible of federal highway funds, may be used to create and operate a state P3 office to assist in the design, implementation, and oversight of P3s, and to pay a stipend to unsuccessful bidders in a P3 “if necessary to encourage robust competition in public-private partnership procurements.” Model legislation previously released by BPC recommends the creation of state P3 offices to provide assistance to agencies or private companies interested in pursuing a P3 and help reduce some of the complexity and uncertainty associated with P3s today.
5. Designates a National Strategy for Freight
The FAST Act requires USDOT to designate a National Multimodal Freight Network, consisting of a National Highway Freight Network (to be established by USDOT and the states), Class I railroads, public ports with total annual trade of at least 2 million tons, inland waterways, and the 50 airports with the most cargo traffic. USDOT is directed to update the National Freight Strategic Plan every five years. States are required to develop state freight plans to govern immediate and long-term investments and are encouraged to create state freight advisory committees. This could help private investors identify national infrastructure priorities and help all levels of government better recognize the interconnectivity of our transportation systems, identify needs, and allocate limited resources.
6. Provides New Grants and Pilot Programs
The FAST Act creates a pilot within the transit New Starts program for up to eight P3 projects to receive expedited approval. These projects can be new rail or bus rapid transit lines, or projects to expand capacity on existing lines. Projects in the pilot receive a reduced federal share of 25 percent (lower than the 60 percent federal share the FAST Act provides for other New Starts projects). In addition, a new grant program is created to help states test alternative user-based revenue mechanisms for funding transportation. Thus far, only Oregon has piloted a vehicle-miles traveled (VMT) fee as a potential alternative to the gas tax, though several other states are considering it. This new grant program could help to expedite research and deployment of VMT fees or other user-based mechanisms, seen by some as more viable than the gas tax in the long term. The program is funded at $15 million in 2016 and $20 million annually in 2017-2020.
7. Encourages Competition and Economic Development to Rail and Transit
The FAST Act encourages public and private consortia to engage in providing rail service by authorizing USDOT to open three of Amtrak’s long-distance routes to competition and to solicit proposals for the development of high-speed rail. In addition, the FAST Act expands federal support for economic development around transit and rail in several ways. It allows TIFIA and RRIF (a TIFIA-like program for rail projects) to be used for transit-oriented development projects. It requires Amtrak to analyze the potential for increasing its revenues through station development and leveraging its right-of-way by allowing telecommunications or other equipment to be placed there.
8. Allows Bundled Projects
The FAST Act clarifies that states may bundle bridge projects together and have the bundle treated as one project for federal funding purposes. This is likely a response to the Pennsylvania Rapid Bridge Replacement program, in which PennDOT bundled more than 500 small bridge projects into a single P3.
9. Supports Innovative Technologies and Project Delivery Improvements
The FAST Act requires a number of reports or other actions to support deployment of new technology or improved project delivery. The law creates an Advanced Transportation and Congestion Management Technologies Deployment Program to provide grants for testing and deployment of new technologies. USDOT is directed to identify national corridors for deployment of electric vehicle charging stations to encourage development of needed electric vehicle infrastructure. USDOT is also directed to issue guidance to encourage pragmatic project delivery and expedited procurement techniques.
10. Changes WIFIA
The FAST Act removes a restriction on the Water Infrastructure Finance and Innovation (WIFIA) program (a TIFIA-like program for water projects enacted last year) that prevented local governments from using both WIFIA financing and tax-exempt debt in a single project. This change should make WIFIA more attractive to local governments, but may inadvertently undermine one of the original goals of WIFIA by reducing their incentive to work with the private sector. This concern was acknowledged by Congress in its FAST Act Conference Report. It specifically directed the Environmental Protection Agency and the U.S. Army Corps of Engineers to ensure that the private sector remains engaged in WIFIA projects.
The FAST Act makes a five-year commitment to increased surface transportation funding and includes a number of changes that support private investment in infrastructure. From speeding up the lengthy and, subsequently, costly permitting and environmental review process to supporting the establishment of state P3 offices, the law recognizes the role private investment may play in delivering critical infrastructure. Not all changes, though, are as beneficial. While Congress worked in a bipartisan fashion to pass the FAST Act, it did not tackle one critical problem—how can we sustainably pay for surface transportation projects in the future. But in the meantime, it has taken a few small steps toward allowing states and localities to engage the private sector to help creatively build and improve our nation’s roads, bridges, railways and more.