Detailed Highway Funding Breakdown
Highway Trust Fund Projections
AGC Highway Facts Bulletin – Congress Approves Long–Awaited Highway Bill
AGC Touts Successes In Highway Bill in Oct 17th Issue of ENR

Key Provisions of Interest to the Highway and Transportation Construction Industry

On August 10, 2005, President Bush signed into law the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA–LU), providing guaranteed funding for federal–aid highways, public transportation, and highway safety programs totaling $286.4 billion over the period FY 2004 through FY 2009, a net gain of 31 percent over the six–year funding in the Transportation Equity Act for the 21^st Century (TEA–21).

SAFETEA–LU Overview

• Builds on the foundation of ISTEA and TEA–21 with focus on the National Highway System and Highway Trust Fund protections.
• Continues focus on capacity expansion, program efficiencies, and maintenance.
• Expands supplemental funding options.
• Recognizes that new revenue sources need to be identified.
• Focuses on funding equity.
• Special emphasis on safety with the creation of a Highway Safety Improvement Program.
• Includes improved work zone safety provisions.
• Creates a new program for projects of regional and national significance.
• Increases the number of congressionally designated high priority projects.
• Improves the environmental and historic review process.
• Streamlines the clean air review process.

Maintaining Highway Trust Fund Protections
Fuel Tax Fraud
Equity Bonus
Projects of National and Regional Significance
High Priority Projects
Tolling and Innovative Financing
Private Activity Bonds
Safety Program/Work Zone Safety
Environmental Streamlining
Transportation Planning and Clean Air Conformity
Financial Stewardship and Oversight
Highways for LIFE Program
Diesel Retrofit
Design–Build
Surface Transportation Research
Future Funding Commissions
Additional AGC Policy Victories

AGC Seeks Revenue Increase—Maintaining Highway Trust Fund Protections

In approaching TEA–21 reauthorization, AGC sought to increase revenue into the Highway Trust Fund by retroactively indexing the federal gas tax, eliminating fuel tax evasion, and ensuring that all highway users pay their fair share into the Highway Trust Fund by capturing revenue lost due to ethanol subsidies and eliminating fuel tax evasion. AGC also sought to ensure that the firewall created in TEA–21, which ensures that gas tax revenue is invested solely in transportation, was maintained. Also maintained but modified is the mechanism, know as Revenue Aligned Budget Authority (RABA), which annually adjusts funding levels to reflect actual revenue deposited into the Highway trust Fund. AGC recommended that RABA be used to ensure that the trust fund balance not be allowed to grow.

In 2004, while waiting for an agreement on highway reauthorization legislation, Congress acted on AGC's recommendations in separate legislation by directing that all ethanol–blended fuels be taxed at the same rate as gasoline and that these user fees be deposited into the Highway Trust Fund, increasing revenues by $2 billion per year.

SAFETEA–LU also achieves AGC's goal of extending the firewall to protect highway and mass transit program funding from having to compete with other discretionary spending programs. RABA is maintained but improved to ensure that funding is kept at a steady pace. If additional revenue is available in 2007, SAFETEA–LU calls for the additional funds to be used first to increase states' return on contributions to the Highway Trust Fund to 92 percent. In years where RABA is negative, a reduction is made to highway funding only if the balance of the Highway Trust Fund is less than $6 billion. Over the life of SAFETEA–LU, the balance of the Highway Trust Fund is expected to be spent fully.

Fuel Tax Fraud

SAFETEA–LU includes AGC recommended provisions to reduce fuel tax evasion and increase receipts into the Highway Trust Fund by an estimated $1.955 billion through FY 2009. For example, SAFETEA–LU attempts to reduce evasion by taxing kerosene at the same 24.4 cents per gallon rate as diesel. Since kerosene can be used as diesel or aviation fuel, and aviation fuel is subject to a lower tax rate than diesel, evasion can occur if individuals pay the lower rate for aviation fuel, but then divert the fuel to highway use. A refund is available if the fuel is ultimately used for aviation purposes. This provision alone is estimated to raise $1.918 billion through FY 2009.

SAFETEA-LU
Funding Summary
($ in billions)

SAFETEA–LU continues the major program categories that had been in place. This chart shows how the new legislation distributed the funds in the different funding categories.

Comparison of TEA–21 and SAFETEA–LU Major Program Funding

Equity Bonus

The Equity Bonus program under SAFETEA–LU distributes funding to states based on equity considerations. Each state receives the following minimum rate of return on state gas tax revenue contributed to the Highway Trust Fund: 90.5 percent for 2005 and 2006; 91.5 percent for 2007; and 92 percent for 2008 and 2009. In addition, no state is to receive less than the following specified percentage increase over the average funding the state received under TEA–21: 17 percent for 2005; 18 percent for 2006; 19 percent for 2007; 20 percent for 2008; and 21 percent for 2009.

Projects of National and Regional Significance

SAFETEA–LU creates a new program to fund transportation infrastructure projects that have relevance and produce benefits on a national or regional level. Benefits could include improving economic productivity, facilitating international trade, relieving congestion, and improving safety. Approximately $1.8 billion from the HTF is provided through 2009 for designated projects. This funding is in addition to the amounts states receive under their formula distribution.

High Priority Projects

SAFETEA–LU continues the trend towards having Congressionally designated projects in the legislation. The High Priority Projects Program provides designated funding for a total of 5,091 specific projects, each with a specified amount of funding over the 5 years of SAFETEA–LU. The funding for these projects is included as part of each states formula apportionment.

Tolling and Innovative Financing

AGC also recommended that additional forms of financing be used to supplement gas tax revenue. Specific recommendations included: toll financing, expanding Transportation Infrastructure Finance and Innovation Act (TIFIA) provisions, and increasing use of State Infrastructure Banks (SIBS). Also, AGC was an early supporter of the creation of a federal bonding program.

SAFETEA–LU continues and expands states’ flexibility to use tolling to manage congestion and finance infrastructure improvements, including a new Interstate System Construction Toll Pilot Program, which will allow states to collect tolls for the purpose of constructing Interstate highways. Both the Interstate System Reconstruction and Rehabilitation Toll Pilot Program and Value Pricing Pilot Program are continued from TEA–21. In addition, SAFETEA–LU creates an Express Lanes Demonstration Program which will allow a total of 15 demonstration projects to permit tolling to manage high levels of congestion, reduce emissions in a nonattainment or maintenance area, or finance added Interstate lanes for the purpose of reducing congestion.

SAFETEA–LU encourages additional investment in surface transportation through innovative financing mechanisms by continuing and expanding eligibilities and options under both the TIFIA and SIBS programs. Under SAFETEA–LU, all states may now capitalize infrastructure revolving fund programs with federal transportation dollars.

Private Activity Bonds

SAFETEA–LU provides opportunity for new sources of investment capital to finance our nation’s transportation infrastructure system by expanding bonding authority for private activity bonds. SAFETEA–LU adds highway facilities and surface freight transfer facilities to the list of activities eligible for exempt facility bonds. These bonds are not subject to the existing general annual volume cap for private activity bonds, but are subject to a separate National cap of $15 billion.

Safety Program/Work Zone Safety

A top priority for AGC in reauthorization was to increase protections provided to workers and motorists in the highway work zone. AGC sponsored a Work Zone Safety Summit in 2000 which identified several priorities to improve work zone safety including increased use of law enforcement officers and positive barriers. Congress included these recommendations in the new law.

SAFETEA–LU includes provisions to address the safety of construction workers in highway construction work zones by authorizing $5 million annually for a grant program to fund work zone safety training. In addition, SAFETEA–LU requires the use of proper temporary traffic control devices in work zones, as well as the use of high–visibility garments by highway construction workers, and encourages greater use of law enforcement officers and positive barriers in work zones. DOTs are required to use unit pay items for traffic control devices.

SAFETEA–LU creates a new Highway Safety Improvement program funded at $5.1 billion through FY 2009 designed to address critical highway safety needs. Of this total, $880 million is designated annually for the Railroad–Highway Crossing Program and $90 million annually for construction and operational improvements on high–risk rural roads. States are required to develop and implement a strategic highway safety plan and submit annual reports on program implementation.

Environmental Streamlining

Another AGC priority in reauthorization was to improve the environmental and historic review process to allow projects to move to construction in a more timely fashion. SAFETEA–LU includes significant changes and improvements to the environmental and historic review process.

SAFETEA–LU designates U.S. DOT as the “Lead Agency” for purposes of defining “Purpose and Need” and the range of alternatives for transportation projects, as well as establishing a plan for coordinating public and agency participation. A significant provision in SAFETEA–LU establishes a 180–day statute of limitations for lawsuits challenging federal agency project approvals.

SAFETEA–LU allows state DOTs to assume the responsibility for determining if projects meet specific criteria and can therefore be excluded from environmental review. A pilot program is created to allow states to assume responsibility to enforce the National Environmental Policy Act (NEPA) and other environmental laws (excluding the Clean Air Act and transportation planning requirements) for highway projects.

Historic preservation laws require that transportation projects avoid or minimize impacts to historic properties that are eligible to be included on the National Register of Historic Places. To avoid unnecessary delays caused by costly and time–consuming reviews, SAFETEA–LU reforms the historic preservation review process (known as Section 4(f)) to allow projects to move forward if a finding of “de minimis” impact is made. The provision also encourages project sponsors to consider mitigation or enhancement measures to improve the impacted resource.

SAFETEA–LU also achieves an AGC goal by exempting the nearly 50–year old Interstate system from historic designation.

Transportation Planning and Clean Air Conformity

AGC also sought to improve the clean air review process to allow transportation projects to move to construction.

SAFETEA–LU reforms the state and metropolitan transportation planning processes by reducing the frequency by which state and metropolitan transportation improvement programs and plans must be updated from every 2 and 3 years, respectively, to every 4 years. As a result, air quality conformity determinations in nonattainment and maintenance areas are conducted less frequently thus reducing potential delays. SAFETEA–LU also contains a 12–month grace period before federal transportation funds are withheld due to a conformity lapse.

Financial Stewardship and Oversight

SAFETEA–LU requires state DOTs to undergo annual reviews of financial management systems and project delivery systems and to develop minimum standards for estimating project costs. Major transportation projects are required to have project management and finance plans. The threshold for defining these projects is lowered from $1 billion to $500 million. Projects exceeding $100 million are now required to have finance plans.

Highways for LIFE Program

SAFETEA–LU creates a new Highways for LIFE Pilot Program providing $75 million in incentive grants designed to demonstrate and promote state–of–the–art technologies, elevated performance standards, and new business practices in the highway construction process that result in improved safety, faster construction, reduced congestion from construction, and improved quality and user satisfaction.

Diesel Retrofit

AGC sought to provide assistance to contractors in retrofitting their off road diesel powered engines to meet anticipated new requirements for retrofit.

The Congestion Mitigation and Air Quality Program (CMAQ) is reauthorized in SAFETEA–LU and provided a total funding level of $8.6 billion through FY 2009. SAFETEA–LU includes an AGC championed provision making the retrofit of diesel powered off road equipment eligible for CMAQ program funds. The provision further stipulates that if contract specifications require the use of retrofitted equipment, CMAQ funds should be provided to contractors to offset the expense of retrofitting their equipment.

In separate energy legislation AGC was successful in getting private fleets of off road vehicles eligible for federal grant funds to retrofit for emission reductions.

Design–Build

SAFETEA–LU eliminates the $50 million floor on the size of eligible design–build contracts.

Surface Transportation Research

SAFETEA–LU authorizes a total of $2.271 billion for surface transportation research activities through FY 2009. Examples of initiatives included under the surface transportation research program include long–term bridge research, long–term and innovative pavement research and deployment, surface transportation environmental cooperative research, seismic research, and transportation safety information management, travel forecasting, and congestion relief research.

Future Funding Commissions

SAFETEA–LU includes AGC's recommendation that a commission be established to study the future of the transportation system and how improvements are to be funded. SAFETEA–LU creates two commissions. One will evaluate the current condition and future needs of the surface transportation system and develop a conceptual plan with alternatives to ensure that the nation's future needs are met. SAFETEA–LU also establishes a National Surface Transportation Infrastructure Financing Commission to complete a study on Highway Trust Fund revenues and develop recommendations for increasing revenues to meet future needs.

Additional AGC Policy Victories

AGC scored a number of additional policy victories in SAFETEA–LU by preventing Congress from including provisions that would have adversely impacted the highway construction industry.

• Storm Water Projects Mandate: AGC defeated a Senate provision that would have diverted a portion of federal highway funds for storm water mitigation projects not connected to highway construction.


• $15 Million Liability Insurance Mandate for Subcontractors: AGC defeated a Senate provision that would have established a $15 million general liability insurance requirement for “work zone safety services contractors, traffic control contractors, and trench safety and shoring contractors.”


• Five Percent Work Zone Traffic Control Mandate: AGC defeated a Senate provision that would have mandated that five percent of all construction contracts be directed to work zone safety control. AGC argued that setting an arbitrary percent was not the appropriate way to address work zone safety.


• Federal Audits of Equipment Purchases by Construction Companies: AGC defeated a Senate provision that would have required contractors and state DOTs to justify the decision to purchase equipment rather than rent it – a business decision rather than a government decision.


• Limitations on Contractor's Political Participation: AGC defeated a House provision that would have allowed states to bar anyone who makes political campaign contributions from competing for federal–aid highway or transit work in their states.


• Mandatory Suspension and Debarment: AGC defeated a Senate provision that would have suspended contractors upon indictment and debarred contractors upon conviction. With the help of the American Bar Association, AGC successfully fought this effort that would have bypassed due process.


• Expansion of Warranty Roads Program: AGC defeated a House provision that would have established a 15–project pilot program using 25 to 30 year pavement warranties. AGC argues that the risks involved only allow a small number of very large companies to participate.


• Fuel Surcharge Mandate: AGC defeated a House provision that would have required shippers to pay an automatic surcharge when diesel fuel prices increased above a set price. This provision would have had significant consequences for contractors who submit fixed–price bids based on product prices and shipping costs at the time of bid.