Jack Basso Chief Operating Officer and Business Development Director

1. THE STATE OF FEDERAL FUNDING AND NEEDS AS WE APPROACH HIGHWAY AND TRANSIT AUTHORIZATION Jack Basso Chief Operating Officer and Business Development Director American Association of State Highway and Transportation Officials (AASHTO)

2. Objectives • To describe how we got to the point we are at today • To briefly outline the needs for the combined levels of government in surface transportation • To describe the looming funding crisis with the Highway Trust Fund • To convey thoughts on new technologies for revenue collection • To discuss the outlook for authorization

3. HOW DID WE GET HERE? • The Interstate System changed the nation’s mobility and economics • Successive legislation has shaped and reshaped our transportation programs • Our nation has grown dramatically • Earmarking has negatively affected the public’s perception of the Federal programs • We have systematically underinvested in our systems and it shows

4. Challenges Facing U.S. Transportation

5. Regional Growth • 88% of growth to concentrate in the South and West

6. Metropolitan Growth • 80% of growth concentrated in metropolitan areas

7. Growth in Trade asPercentage of Economy

8. Freight Double by 2035Yes, Double!! Net Tons (in Billions) 35 Truck Rail 30 Water 25 Other Air 20 15 10 5 0 2005 2007 2015 2017 2019 2023 2029 2011 2031 2013 2021 2025 2027 2033 2035 2009 Year Source: Global Insight 2004 TRANSEARCH data and economic forecasts.

9. Highway Needs Through 2030

10. Transit Needs Through 2030

11. Transit Needs Through 2030

12. Problem 1: An Immediate Funding Crisis *Obligation level proposed in the President’s 2008 budget request, which includes a suspension of $631 million in RABA funding.

13. INFLATION80 PERCENT LOSS

14. AASHTO AnalysisNational Commission Findings • Expediting Program Delivery, Performance-Based Program and Planning • Program Restructuring to Address 10 National Priorities • Revenue Recommendations, NASTRAC (Independent Revenue Commission)

15. Performance-Based Planning Process • Systematic, standardized performance based approach to programming investments • Top-Down: National performance goals, standards and criteria national strategic plan • Bottom-Up: State & metro/local performance goals, standards and criteria  plans and programs • Merit-based project selection • Accountability for results

16. Ten Point Program Structure • Rebuilding America • Multimodal eligibility (NHS roads, transit assets, passenger and freight rail ) • States/locals/others need to have asset maintenance plans meeting national standards • Freight Transportation • USDOT to develop a National Freight Plan and performance standards • B/C analysis required; target is high cost, high benefit projects • Congestion Relief • Funding for areas greater than 1 million population • National mobility standards and local mobility plans to be developed

17. Ten Point Program Structure, cont. • Saving Lives • USDOT to set national safety standards—cut fatalities in half by 2035 as a start • States and metro areas required to meet individual standards (goals) and develop 4 E’s strategies to meet their goals • Connecting America • USDOT developed performance measures for rural and small urban mobility and access—highways and transit • State developed performance standards and economically justified plans to meet the standards • Intercity Passenger Rail • State developed rail plans using B/C analyses to be folded into a National Intercity Rail Passenger Program • State performance measures to meet national criteria in such areas as on-time performance, safety, energy use, etc.

18. Ten Point Program Structure, cont. • Environmental Stewardship • Funded at 7% of total federal transportation program spending overall • State allocations based on population • 40% to targeted strategies; 60% flexible • Energy Security • $200 m per year for energy R&D • Federal Lands • Continue the programs • Performance standards and goals to be developed • Research, Development and Technology • Federal funding for targeted knowledge gaps

19. Revenue Recommendations • Increase Investment through enhanced revenue • Continue to Share Funding Responsibility • Percentage Shares • Increase Revenues • Near Term: Fuel Tax Remains Key Source • Toll Revenue • Public Private Partnerships • Long Term: Develop Revenue Alternatives

20. Revenue Recommendations, Con’t. • Dedicate Funding to Freight-Related Transportation Improvements • Assist Rail Freight • Intercity Passenger Rail

21. Funding • GAS TAX REMAINS VIABLE FOR 20 YEARS • Take immediate action to keep the HTF solvent • Increase gas tax 5 to 8 cents over the next five years • Index after 5 years to inflation • Increase truck sales taxes proportionately • Create a ticket tax for transit to supplement HTF and GF revenue

22. Funding, Con’t. • ENHANCE FREIGHT INVESTEMNT • TAX CREDITS • CUSTOMS FEES • FEDERAL FREIGHT FEE • INTERCITY PASSANGER RAIL • TICKET TAXES • HIGHWAY USER REVENUES • GENERAL FUNDS • $5 BILLION PER YEAR TOTAL

23. Funding, Con’t. • LONG-TERM • BEYOND 2025 DEVELOP ALTERNATIVES TO THE FUEL TAX • POSSIBLE OPTIONS INCLUDE MILAGE BASED USER FEES • NEXT REAUTHORIZATION REQUIRE A MAJOR STUDY OF OPTIONS • SURFACE TRANSPORTATION TRUST FUND • REPLACES THE HTF AS WE KNOW IT • RETAINS FIREWALLS AND GUARANTEES • CAPITAL COSTS THE DRIIVER OF DISTRIBUTIONS

24. The future • The short-term will rely on current methods • The political will is not there currently for substantial additional funding • There is a critical need for a commission and they have reported • New technology will make possible new revenue collections • State and locals will play an ever increasing role in revenue growth

25. Revenue Picture • Highway Trust Fund revenues are NOT declining • 1995-2005: $22 billion to $38 billion • 2005-2015: $38 billion to $47 billion • Fuel tax is still viable • But purchasing power eroding • Spending has exceeded income

26. Federal Highway Program Possible: with 3-Cent Fuels Tax Adjustment in 2009 with Additional 7-Cent Adjustment Through 2015 or Equivalent

27. All Levels of Government Must Continue to Fund Their Share National Capital Investment in Highways (billions) 2010 2015 Funding New Toll Net Increase Revenue Required Needed Federal $43 $73 $30 $30 State/ $52 $87 $35 $8 $27 Local Total $95 $160 $65 $8 $57

28. State and LocalTransportation Revenues

30. Questions? Peter “Jack” Basso Chief Operating Officer American Association of State Highway and Transportation Officials 444 North Capitol Street N.W., Suite 249 Washington, DC 20001 Phone: (202) 624-5800 Fax: (202) 624-5806 Email: jbasso@aashto.org