Trump Administration Continues Infrastructure Privatization Push, Starting with the FAA

atc-sstock“The President wants to fix the problem.”

The Washington Post reported yesterday that, in an effort to kick off Infrastructure Week (and perhaps refocus his Administration from a few outside distractions), President Trump will submit a proposal to Congress next week calling for handing over control of the nation’s air control system to a non-profit corporation.  Long a pet issue by some lawmakers, support for this idea largely (but not totally) falls along party lines.  The idea had even received some serious bipartisan consideration, although no legislation ever gained serious traction.

From the Washington Post:

President Trump will seek to put a spotlight on his vows to privatize the nation’s air traffic control system and spur $1 trillion in new investment in roads, waterways and other infrastructure with a week-long series of events starting Monday at the White House.

It’s an idea that has been tried many times before, dating back to the Clinton administration and, most recently, last year in legislation championed by Rep. Bill Shuster (R-Pa.), chairman of the House Transportation Committee. His bill never made it to the Senate, where several key GOP members resisted the idea of transferring government assets to a corporation.

But perhaps the most interesting part of this proposal is it actually includes a pay-for:

From Bloomberg News (emphasis added):

Trump’s air-traffic control plan will be based largely on legislation introduced in 2016 by Representative Bill Shuster, the Pennsylvania Republican who chairs the House Transportation and Infrastructure Committee, according to a White House official. The official said there would be some changes from Shuster’s plan, which stalled in the face of opposition in the Senate and among some leading House Republicans, but declined to say what they would be.

While providing few specifics, Cohn said Trump’s proposal would create a new user fee to replace current taxes on aviation fuel and airline tickets. He also said there would be unspecified protections for rural airports; critics of the air-traffic plan have said it would jeopardize small airports by giving too much power to airlines and large hubs.

It’s hard to know exactly whether identifying a pay-for this early in the game helps or hurts this proposal with Congress (I suspect it probably doesn’t help, at least initially.) Also, it isn’t clear this proposal will result in net new revenue or just a reshuffling of taxes and fees (add one here while another one is eliminated.)  But the fact that there’s discussion about it this early in the process could mean this proposal is moving quickly behind the scenes.

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Shh! States are (quietly) raising their gas taxes. And some in the White House are considering it, too.

Capture

Despite the failure of Louisiana’s 17-cent gas tax increase proposal last week that would have levied as much as $500 million annually for road and bridge projects, a recent analysis by the Institute on Taxation and Policy found that as many as 24 states (as in one state shy of fully one-half of all the states in the Union) raised their state gas tax rate since 2013.  In 2017 alone, six states have raised their gas taxes, including the bleeding-heart liberal/tax-and-spend happy states of South Carolina, Montana, Tennessee, and Utah.

From the Tax Justice Blog:

2017 Enacted Legislation

  • California: A 12-cent gas tax increase and 20-cent diesel tax increase will take effect on Nov. 1, 2017. The new law also changes the formula that California uses to implement ongoing gas tax rate adjustments. Among those changes are a new provision allowing for gas tax increases based on the rate of inflation within the state’s borders.
  • Indiana: A 10-cent increase will take effect July 1, 2017. Further adjustments will occur between 2018 and 2024 based on a new formula that considers both inflation and the rate of growth in Indiana’s personal income. The new law also shifts the portion of sales tax revenue collected on gasoline purchases out of the general fund and toward transportation instead.
  • Montana: A 6-cent per gallon gas tax increase will be phased-in over 6 years. Most of the increase (4.5 cents) will take effect on July 1, 2017. The remainder will be implemented in 0.5 cent increments between July 1, 2019 and July 1, 2022. The state’s diesel tax will eventually rise by 2 cents, with most of that increase (1.5 cents) taking effect July 1, 2017.
  • South Carolina: The legislature overrode Gov. Henry McMaster’s veto to enact a 12-cent per gallon increase in the tax rate on both gasoline and diesel. The increase will be phased-in over 6 years, with the first increase (of 2 cents per gallon) taking effect on July 1, 2017.
  • Tennessee: The gas tax will rise by 6 cents and the diesel tax by 10 cents on July 1, 2017. While Gov. Bill Haslam initially proposed indexing the state’s gas tax rate to inflation, this reform was not included in the final package passed by the legislature.
  • Utah: A new law modifies the variable-rate gas tax formula enacted by Utah lawmakers in 2015 in a way that will allow for somewhat more robust revenue growth. The new formula is expected to result in a roughly 0.6-cent-per-gallon tax increase in 2019 and a 1.2-cent increase in 2020.

Sarcasm aside, the point is state legislatures (both Democrat and Republican controlled) are starting to take their infrastructure funding woes seriously.

Not to be outdone, it looks like the White House also wants in on the action.  Late last week, The Hill reported that Richard LeFrak, real-estate mogul and one of President Trump’s key advisors guiding his $1 Gazillion dollar infrastructure package, is also not not willing to explore the possibility of raising the federal gas tax.

From The Hill:

One of President Trump’s advisers says he supports hiking the federal gasoline tax to help pay for new roads and bridges — a politically fraught issue that Congress has avoided for years.

Richard LeFrak, a real estate developer leading a new White House council to vet infrastructure projects, told CNBC on Wednesday that he is “in favor” of increasing the gas tax, which hasn’t been raised in over 20 years.

The federal fuel tax is currently 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.

“You’d be leveling it to where it would have been had they adjusted it for inflation in 1993,” he said. “If they did adjust it for inflation … it actually would produce tens of billions of dollars to annual revenue that would be reinvested.”

Obviously, there’s reason to be very skeptical. First, there’s the feat of getting a tax increase through a Republican-controlled Congress.  Furthermore, it isn’t even clear everyone in the White House is on the same page as Mr. LeFrak.  President Trump’s budget proposal released last month wasn’t exactly the boon to infrastructure funding most were hoping for, with some Democrats calculating it will reduce (as in the opposite of increase) overall federal outlays by $145 billion over the next 10 years.

Regardless of what the White House (and really Congress) decides to do, what does appear likely is continued action by state and local governments.  Infrastructure needs aren’t going away, and there’s a limit to what creative financing can do.  For now, at least, more state legislative leaders are making the calculation that funding their state’s transportation infrastructure is worth the heartburn they’ll get afterward.

Givin’ it another go…

It’s been a while since I’ve given this blog the attention it deserves.  After about a year-long hiatus, I think it’s worth bringing this back conversation back from the dead.  A lot has happened in the past year.  My aim is to feature interesting infrastructure initiatives, ideas, and perspectives worth highlighting.  I realize my previous posts are a bit Texas-centric.  This is partly because 1) Texas is awesome and 2) Nothing much else really was going on outside the state. So sorry/not sorry on that one.

Since my last post, my wife and I have also moved to the Research Triangle in North Carolina. I had high expectations for the area before moving here, and so far so good.

Stay tuned–I’m hoping that, at the very least, I can find the time to keep this blog going.

BALLOT WATCH: $1.6 Billion Dallas ISD School Bond

dallasisdSwitching gears a bit, Dallas ISD voters will be weighing in on a massive $1.6 billion school bond election this November. Tawnell Hobbs of the Dallas Morning-News Educational Blog:

Dallas ISD trustees on Friday approved placing a $1.6 billion bond package on the Nov. 3 election ballot.

Now it’s time to sell it to voters.

“The plan is financially conservative. It’s been extremely well-planned for well over a year. It’s a major win for the kids of Dallas,” trustee Mike Morath said.

The package includes money for nine new and replacement schools, 290 additional classrooms, technology upgrades, improvements to cafeterias and science labs, and other enhancements. The district also expects to add prekindergarten classes and expand specialized programs, such as Montessori and career training.

[…]

Michael Hinojosa, who was superintendent from 2005 to 2011, is leading the district as an interim superintendent. Trustee Miguel Solis said Friday that he would be good in the permanent job.

[…]

“This is a very robust plan,” he said. “Not only is there a need, but it also incorporates a lot of the strategies that have been developed over the last few years.”

The plan won’t bring a tax rate increase as existing debt and new debt would be managed to keep that from happening, according to the district.

Voters will be asked to approve the dollar amount for the entire package and not individual projects. District officials said that changes can be made to projects in the plan at any point.

While there appears to be a few concerns about whether voters would be willing to support this bond in light of some of the district’s well-publicized controversies in the past several years, the proponents appear to have confidence that voters will ultimately approve it, and perhaps rightly so.

As of now, my best guess is that voters will likely approve this measure, 66-34.

Montgomery County Attorney Says Road Bond is Not Voidable

This story keeps getting more interesting by the day.  Catherine Dominguez of the Montgomery County Courier:

Montgomery County Attorney J D Lambright believes that the Commissioners Court meeting Aug. 24 and vote to place a $280 million road bond on the November ballot would be upheld in civil court.

On Friday, the County Judge’s Office released a seven-page opinion issued by the County Attorney’s Office addressing the meeting and vote. It did not address the criminal investigation into whether certain members of Commissioners Court and other individuals possibly violated the Texas Open Meetings Act prior to the special meeting and vote.

[…]

“It is our strongly held opinion that the action of Commissioners Court in calling the November 3 Road Bond Election complied with TOMA and was lawfully made,” the opinion stated. “As a result, we find no basis in law or in fact (including the furnished email) that would provide for the Commissioners Court’s action setting the election to be voided or subject to either mandamus or injunction.”

Bridget Balch of the Chronicle provided further details about the different parties at play:

As investigations into the validity of the $280 million Montgomery County road bond set for this November’s ballot are underway, The Woodlands Township is taking heat from some residents who believe the board’s decision to publicly oppose the bond last week was premature.

“The facts concerning this investigation are not even out yet,” said Penny Benbow, a resident from the east side of South County, at the board’s meeting Wednesday.

[…]

“This bond affects everybody on the east side of 45. We need these roads for our infrastructure – we’re growing like crazy,” Benbow said at the Feb. 25 meeting. “I’m almost in tears to think that the extension of Woodlands Parkway could keep this bond from moving forward.”

She returned to Wednesday’s meeting to speak on behalf of this revised bond, which does not include the Woodlands Parkway extension, and to ask The Woodlands to return the favor that other South County residents who voted against the May bond did for them.

“Rayford Road now is in gridlock, motor vehicle accidents are a daily occurrence,” she added. “To fix it, we need this bond … Your neighbors stood by you in May, now it’s time for you to stand by your neighbors.”

Chuck Meyer, vice president of the Panther Creek Village Association and a candidate for The Woodlands Township Board, took a more aggressive approach to rebuking the board for its resolution against the bond.

“I’m in the sad position of having lost respect for this institution,” he said at Wednesday’s meeting. “Many county residents see (The Woodlands) as spoiled, petulant and arrogant … We need to work with our county leadership and our fellow residents in the county – not throw them under the bus.”

It appears that proponents and opponents are divided by geography more than anything else. The perception now appears to be that those that live exceptionally wealthy, leafy Woodlands Township don’t want their taxes to go up in order to benefit the proletariat in the other parts of the county.  When I first read about the possibility of an investigation about this bond election, I was fairly sure it was a no-go.  Knowing how Texas voters, particularly suburban voters, vote down anything that brings up visions of “back room deals,” I didn’t have much hope.  However, it’s certainly possible that traffic is so bad, so absolutely awful that voters are willing to stomach it.  The coalitions forming in this case are interesting, and to be sure the Woodlands Township certainly has major sway; however, their influence may not be enough to counter the desire by others in the county to fix a problem that’s quickly getting worse.

Houston ISD Cites Construction Cost Overruns as Major Factor in Bond Funding Shortfall

HISDIn 2012, voters approved a $1.89 billion bond package that including rebuilding as many as 20 schools around the district; however, some are saying that the district may have misled voters by promising to build far more schools than the district could afford.  Tracy Clemons of KTRK:

Some voters believe the Houston Independent School District pulled a bait and switch on a bond proposal they approved back in 2012.

[…]

Davis is one of 20 schools that are supposed to be rebuilt with the $1.89 billion bond voters passed in 2012. But district officials say they’re $211 million short of being able to finish all the promised projects.

“Are we going to modify the project designs to accommodate to this deficit?” wonders HISD Board of Education member Juliet Stipeche.

In a statement Tuesday afternoon, a HISD spokesperson said “The amount of funding budgeted for each of those projects remains the same today as it was on Election Day. However, that dollar amount may not stretch as far as it once would have as a result of rising inflation and construction costs throughout the city.”

“If it is truly attributable all to inflation, then let’s take a look at that and make sure we can go to the community and say this is inflation, it’s not based on anything we could’ve done or corrected.”

“The audit is a good idea. But I don’t think we’re gonna find out anything more differently that what we already know: that you are not going to build these African American schools,” says Gerry Monroe with the United Urban Alumni Association.

How this plays out can have important consequences for future school bond elections for many reasons.  Perhaps the most obvious reason is that, if handled poorly, it could give easy ammunition to bond opponents looking to defeat any future bond measure by Houston ISD or other Houston-area school districts.  It’s probably safe to assume that in 2012, most voters thought this bond was going to easily cover the costs needed to build the promised schools, maybe even leave a little cash left over. (You never budget for less than you need, right? Right?)  The problem is that if Houston ISD ever needs to go before voters again in the future (correction: when!), opponents on the City’s east side, upset about feeling slighted, might align with conservatives on the west side of the district to defeat the measure.  Why allow such a formidable coalition to form?  Houston ISD leaders would be smart to move forward with this audit and make it unequivocally clear they will fully investigate the matter.  Inflation costs wrecking havoc to the budget? Fine.  But be sure to make that clear to voters and maintain a clear, simple, and consistent message.  When I voted for this bond measure in 2012, I had confidence the district knew how to spent it, and I still do today.  However, perceptions matter, and any time a school district is seen as either incompetent or being willingly unfair, helps no one.

New Developments in Montgomery County’s November Bond Election…

TxmontgomeryAs I’ve written before, after the failed road bond election this past May, Montgomery County TX officials have again decided to put a road bond ballot before voters this November.  This revised bond package, totaling approximately $270 million, was approved by the Montgomery County Commissioners’ Court back in late August.

However, recent developments now possibly put this bond election into question, according to a story today by the Houston Chronicle’s Cindy Horswell:

A special prosecutor has been assigned to determine whether behind-the-scenes negotiations could void a last-minute deal struck by Montgomery County commissioners to get a scaled-back $270 million road bond package on the upcoming November ballot.

In question is whether some commissioners and a powerful tea party group violated the open meetings law.  It would mark the third defeat of a road bond proposal in the past decade, with the last one coming four months ago when voters rejected a 20 percent larger bond proposal.

This controversy has even prompted the highly influential Woodlands Township Board to pull their support.

[…]

On Thursday night, The Woodlands Township Board voted unanimously to withdraw support given to the November bond package in light of the investigation.

“It stinks.  It’s a backroom deal deal that lacks transparency,” said Township Chairman Bruce Tough.  “A special interest group (Texas Patriot PAC) is dictating terms of the road bond to the county.  They are not elected to represent us.”

In a strange story that includes the tea party group in question calling another a fake, Ms. Horswell’s excellent story is definitely worth a read.

Also, if you were to ask me a week ago, I would’ve told you there was no way this bond package could fail.  Now, I have no idea how it can succeed. Legal issues aside, the serious challenges remain political. How you move the political conversation away from “backroom bond deal done without proper input” toward “have you seen how much our county is expected to grow in the next 20-30 years? We need more roads NOW!” will take some serious skill and tons of GOTV work.  This also highlights how quickly bond elections can change, and from my perspective, how interesting they can be to follow.