Reston Spring

Reston Spring
Reston Spring

Thursday, May 15, 2014

Will the bankruptcy of the US Highway Trust Program affect the Silver Line's TIFIA financing?

The short answer:  We don't know for sure, but it certainly looks like it will.  Implication:  If no new funds are found for the Highway Trust Fund (HTF) by August, TIFIA financing will not be available and future tolls on the Dulles Toll Road could explode as earlier forecast, including increases as soon as next year.

A few weeks ago, all the area politicians were ecstatic that the Department of Transportation had approved the joint application of MWAA, Loudoun, and Fairfax counties for a TIFIA loan totalling about $1.9 billion for the construction of the Silver Line.  The loan would substantially reduce by about one-third the grotesque forecast growth in Dulles Toll Road tolls to more than $18 per one-way trip by mid-century (about $7.75 in 2013 dollars--more than double the current toll).  Moreover, all the parties were gleeful that the loan would preclude the need for any toll increases before 2019 because TIFIA's loan terms permit deferring payments for five years. 

Unfortunately, reality has intervened as TIFIA's funding source, the HTF, is expected to be insolvent in August.  Here's how DOT's summary of TIFIA describes its funding:
(TIFIA is) Funded by contract authority and reimbursed from the Highway Account of the Highway Trust Fund, to remain available until expended. Funds are subject to the overall Federal-aid obligation limitation.
The Highway Account is the account specifically expected to go belly up this summer in light of declining gasoline tax revenues, which have been eroding for years.

Business Insider takes a look at what our completely dysfunctional US Congress might do to address the issue.  As these excerpts suggest, it is not optimistic:
The fundamental problem is that gasoline taxes alone are no longer enough to finance the Highway Trust Fund, due to declining fuel use across the U.S. However, neither the White House nor Congress wants to raise those taxes, and there is a disagreement about how to fill the fund without them.
Simply put, spending on transportation and infrastructure now exceeds gas taxes taken in. During recent testimony before the Senate Finance Committee, Joseph Kile, the assistant director for microeconomic studies at the congressional budget office, laid out two politically painful potential solutions — either cut spending in the fund's two accounts by 30% and 65%, or raise the gas tax by 10 to 15 cents per gallon.
In an election year, both options are non-starters. The gas tax hasn't been raised since 1993. Though increasing these tariffs seems like the most logical solution to most analysts, it won't have a chance before the midterm elections. Kile said Congress could also shift money from the rest of the federal budget to the Highway Trust Fund, which seems like the most politically palatable option.
When he issued his dire warnings Wednesday, Obama advocated for his solution to the fund fiasco — a four-year, $302 billion transportation and infrastructure plan. Warning the "cupboard will be bare," he urged Congress to act on his plan — but that too seems unlikely. Obama's plan would require about half the cost to be paid for by closing corporate tax loopholes and through other changes Republicans have long resisted. . . .

And just Monday, Bond Buyer reports that Senator Barbara Boxer, Democrat from California, has introduced a new Transportation Bill.
The draft transportation bill released Monday night by a Senate committee calls for $242.4 billion of federal funding for highway projects over six years and would authorize $1 billion a year for the popular Transportation Infrastructure Finance and Innovation Act credit enhancement program.  (Emphasis added.  Also note that the $1B to be authorized works as a reserve and leverages about ten times a much in TIFIA loans or about $10B.)
The Senate Environment and Public Works Committee plans to vote Thursday on the highway bill, which keeps federal funding for highways through fiscal 2020 at fiscal 2014 levels plus inflation. The committee is expected to approve the bill this week. . . .
Then the bill must pass the full Senate and, oh yes, the Republican-controlled House before President Obama may sign it into law.  So we are a long way from filling the pot that TIFIA draws from. 

In a recent discussion among regional Congressional officials in a meeting led by Senator Tim Kaine, Kaine seemed to agree that Silver Line TIFIA financing would not be forthcoming absent an infusion of funds into the Highway Trust Fund.  According to an observer, there was great uncertainty as to whether Congress would be able to find a solution to the problem.

Stay tuned.

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