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January 24, 2017 Interim Update
prepared by CATHY CONNOR - DIRECTOR OF FEDERAL GOVERNMENT AFFAIRS
Today, the Senate Commerce Committee voted by voice vote to approve the nomination of Elaine Chao to be US DOT Secretary. A vote by the full Senate may not occur until Monday.
Senate Democrats unveiled their own 10-year $1T infrastructure plan earlier today - "A Blueprint to Rebuild America's Infrastructure". Here is a link to a summary of the plan. It would be paid for with federal funds by closing tax loopholes. The plan will be very difficult to get approved by the Republican-majority Congress. It includes:
$100B for roads and bridges
$130B for transit and bus systems
$50B for rail (including Amtrak and HSR)
$30B for airports
$10B for ports and waterways
$10B for TIGER
$200B for a "Vital Infrastructure Program" for priority projects
$110B for water and sewer systems
$100B for energy infrastructure
$10B for new innovative financing tools, such as TIFIA, RIFF, WIFIA and an infrastructure bank
$100B for "Main Streets" in local communities
$75B for schools
$10B for VA hospitals and other VA facilities
$20B for expanded broadband
$20B for infrastructure on tribal and public lands
A new Congressional Budget Office (CBO) report predicts that in 10 years federal gas tax receipts will be 15% below the FY'17 estimated receipts and diesel tax receipts will be down by 2%. On the other hand, trucks taxes will be up by 33%, although they make up only a small percent of the revenues in the Highway Trust Fund. It also says that an additional $120B in revenues will be needed to pay for the next six-year surface transportation authorization bill.
President Trump has signed an Executive Order "Expediting Environmental Reviews and Approvals for High Priority Infrastructure Projects". Here is a link to the EO. The Order directs the White House Council on Environmental Quality (CEQ) to determine whether an infrastructure project qualifies as "high priority". The CEQ shall "coordinate with the relevant agency to establish, in a manner consist with law, expedited procedures and deadlines for completion of environmental reviews and approvals".
President Trump also signed a Presidential Memorandum authorizing the construction of Keystone XL and Dakota Access pipelines. Here is a link to the Keystone memo and a link to the Dakota Access memo. He also signed a memo directing the Secretary of Commerce to develop a plan under which all new and retrofitted pipelines in the US use materials and equipment produced in the US.
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On Friday, Donald J. Trump will be inaugurated as the 45th President of the United States. Trump has made numerous appointments of senior White House advisors and has nominated candidates for most Cabinet posts. In an effort to expedite the congressional confirmation process, the Senate has been holding confirmation hearings on many of the nominees with the expectation of voting to approve them as soon as Trump is sworn-in. On January 3, the 115th Congress was sworn-in with Republicans in control of both the House and Senate.
The Republican led Congress, energized by the election of a Republican president, is off to a fast start. Republican leadership's first priority is repealing and potentially replacing the Affordable Care Act. Next up will be completing the FY'17 budget and appropriations bills (the current short-term FY'17 funding expires on April 28), starting the FY'18 budget process, crafting a major tax reform bill, and passing legislation to overturn and reform numerous Obama Administration regulations.
The prior Congress completed action on many key infrastructure bills including the FAST Act, which authorized highway, transit, and rail programs for five years, and the WIIN water authorization bill. That leaves reauthorization of FAA's airport and aviation programs for the new Congress to tackle. A short-term extension of the FAA expires on September 30, 2017. The primary issue holding up passage is a very controversial House-led proposal to privatize the Air Traffic Control (ATC) system.
Congressional leaders plan to use the budget resolution/reconciliation process to package and move many of their new initiatives because that mechanism does not require a "super majority" of 60 votes in the Senate to pass. That allows Senate Republicans, with their 52-seat majority, to avoid having to depend on Democratic votes.
Few, if any, additional details have been released about candidate Trump's bold plan for $1T over ten years in infrastructure investment. It now appears this initiative will likely be a "Day 200" issue developed later this spring rather than first up. At least until after January 20, there are more questions than answers including:
How is infrastructure being defined? Will it primarily be transportation and water infrastructure or will it include pipelines, such as the Keystone pipeline, the electric power grid, cybersecurity, broadband, public buildings, etc.? The broader the definition, the less money potentially for a particular sector.
What form will the investment take? Will it be predominately private sector financing including P3s, tax credits, repatriation, or tolling; i.e. loans which need to be paid back and are only applicable to a select number of projects, or will it include long-term, sustainable federal funding for the Highway Trust Fund such as a gas tax or other revenue increase?
Will it be focused primarily on iconic or legacy projects as some have suggested? This approach would benefit certain critical mega projects such as NY/NJ's Gateway, Chicago's CREATE, Ohio's Brent Spence Bridge, etc., but could leave nothing for some states and for much needed maintenance and rehabilitation projects across the country.
Who will have the lead in developing the plan? Will it be US DOT or perhaps the Treasury Department given the focus on tax revenues or the White House given Trump's personal interest? Will it be driven by the House Ways & Means and Senate Finance Committee rather than the traditional transportation authorizing committees?
Will Congress cooperate with the Trump Administration? Many fiscal conservatives in Congress, including Rep. Mick Mulvaney (R-SC) who has been nominated to lead the Office of Management & Budget (OMB), are leery of funding proposals that would increase the deficit.
On January 11, the Senate Commerce Committee held its confirmation hearing on Elaine Chao's nomination to be US DOT Secretary. While many of the hearings for other nominees have been quite contentious, the Senators of both parties were friendly, warm and supportive of Chao. This is not surprising given her significant experience in prominent federal government positions, including as Deputy Secretary of US DOT, and her marriage to the Senate Majority Leader, Mitch McConnell (R-KY). Chao answered most questions about policy issues by saying it was premature for her to answer until she was more formally briefed and promising to study the issue or to meet with competing stakeholders, which are not unusual responses for nominees.
She emphasized the top priority of safety issues, reducing redundant and burdensome regulations, and the value of private investment and innovation. She did not provide any substantive details about President-elect Trump's campaign promises to fund infrastructure. A number of Senators emphasized that it is critical that any proposals include long-term sustainable funding for the Highway Trust Fund, not just tax credits or other types of financing. Issues that were raised by various senators included Buy American, Davis Bacon, FAA reauthorization, PTC privatization, drones, autonomous vehicles, airport security, drunk driving, NextGen, P3s, freight, and TIGER grants.
Chao is expected to be easily confirmed by the full Senate. No other US DOT nominations for the various Assistant Secretaries positions or modal Administrators have been announced. Here is a link to Chao's opening statement before the Senate Commerce Committee and to her nomination questionnaire.
FHWA has released one of the last regulations of the Obama Administration - the final rule on National Performance Management Measures; Assessing Performance of the National Highway System, Freight Movement on the Interstate System, and Congestion Mitigation and Air Quality Improvement Program. This final rule is the third and last in a series of related rulemakings that together establish a set of performance measures for State DOTs and MPOs to use as required by MAP-21 and the FAST Act. The rule includes a very controversial provision requiring states to measure greenhouse gas emissions on roads which was not specifically authorized by Congress. Here is a link to the text of the regulation. It has not yet been published in the Federal Register.
EPA launched the Water Infrastructure Finance and Innovation Act (WIFIA) program this week, providing $1B in credit assistance to state and local governments to build drinking water, wastewater, and drought prevention projects. WIFIA provides water clients with another source of low-cost financing to support major water projects. EPA will accept letters of interest from prospective borrowers through April 10, 2017. Because borrowers must match the WIFIA funds, EPA estimates that the $1B in financing will support approximately $2B in total infrastructure investment. Here is a link to more information.
Secretary Foxx named Martin Klepper as Executive Director of the US DOT Build America Bureau. Klepper is a senior partner at the Energy and Infrastructure Projects Group at Skadden, Arps, Slate, Meagher & Flom. According to US DOT, Klepper is experienced at developing, financing, acquiring and selling transportation, energy, and other large infrastructure projects in the US and abroad. The Build America Bureau is the renamed National Surface Transportation and Innovative Finance Bureau, which was created by the FAST Act. The Build America Bureau provides P3 and NEPA expertise and administers the FASTLANE, RRIF, and TIFIA programs. The initiative is an expanded version of President Obama's BATIC. Here is a link to the US DOT press release about Klepper's appointment.
In related news, the Build America Bureau has issued a Credit Programs Guide for the TIFIA and RIFF federal financing programs. Here is a link to the guide.
The latest version of US DOT "Status of the Nation's Highways, Bridges and Transit Conditions and Performance" report has been released. The biennial report to Congress identifies an $836B backlog of unmet capital investment needs for highways and bridges, or about 3.4 percent more than the estimate made in the previous report. The report also indicates that $26.4B is needed per year to improve the condition of transit rail and bus systems. Here is a link to the report.
On January 12, outgoing US DOT Secretary Anthony Foxx released his Cabinet Exit Memo in which he highlights many of the key accomplishments of both his tenure and the past eight years of the Obama Administration at the Department. Here is a link to the memo.
US DOT has announced the creation of a "Committee on Automation," which will be charged with advising the department on issues like driverless cars. The committee's 25 members include Chesley "Sully" Sullenberger as well as leaders from FedEx, Zipcar, Hyperloop One, Delphi Automotive, the National Safety Council, Uber, Lyft, Apple, Waymo, Amazon, ATA and TTD, AFL-CIO. Mary Barra, the CEO of GM, and Los Angeles Mayor Eric Garcetti will co-chair the committee. J. Chris Gerdes, an engineering professor at Stanford University, will serve as vice chair. The group met for the first time on Jan. 16. Here is a link to the US DOT press release.
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Over the weekend, the Senate passed the latest short-term Continuing Resolution (CR) which extends current FY'16 funding through April 28, 2017 for all federal agencies. The Senate wanted the extra month (beyond the originally proposed date of March 31) to give them sufficient time to complete the Trump cabinet confirmations before taking up funding and budget bills. The CR includes $170M for the Flint water crisis. It does not include the higher FY'17 funding levels authorized for highway and transit programs in last year's FAST Act. However, the CR does include $20M to fund the first loans under EPA's WIFIA innovative financing loan program for water projects. WIFIA was created in the 2014 WRDA bill, but had never been funded.
The Senate also passed the Corps of Engineers' Water Resources bill - now referred to as WIIN. The legislation includes the Water Resources Development Act (WRDA), which authorizes port, waterway, and flood protection improvements for the country as well as the Water and Waste Act of 2016 to help communities meet the requirements of the Safe Drinking Water Act and authorize state regulation of coal ash. Here is a link to the final text of the bill - Water Infrastructure Improvements for the Nation Act - (ignore the bill heading). See Section 1401 (beginning on page 212) for the list of 30+ new Corps of Engineers projects authorized in the bill, totaling $11.68B, and Section 1201 (page 139) for a list of authorized studies. Here is a link to a summary of the bill prepared by the House T&I Committee.
The House had previously passed both the CR and the WIIN water bill earlier in the week. President Obama signed the CR over the weekend and is expected to sign the WIIN bill shortly.
The 114th Congress is now over and Congress has adjourned until next year. Any bills which were not passed and signed into law are now dead and will have to be re-introduced next year.
The new 115th Congress will be sworn-in on January 4. Donald Trump will be inaugurated on January 20.
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According to numerous, credible media sources, President-elect Trump plans to announce shortly that he will nominate Elaine Chao to be the next Secretary of Transportation. Her nomination must be confirmed by the US Senate in the new 115th Congress. This nomination comes as a surprise since Chao's name had not been previously mentioned in the press among the many other names rumored. However, Chao is very knowledgeable about transportation having served as US DOT Deputy Secretary during the George H. W. Bush (41) Administration. She later served as Labor Department Secretary under George W. Bush (43) for the entire eight years of that Administration. She is viewed as being very smart and capable - someone who knows how to run a federal agency. She was considered to be a hard worker who kept her head down and avoided unnecessary controversy. She has a particularly strong background in maritime and labor issues.
No other US DOT nominations have been announced, but once the Secretary has been officially named, it is typical to see other positions, such as modal administrators, named. However, it is not unusual to be well into the spring before all key agency positions are nominated and confirmed.
Here are some highlights of Chao's background and career:
Born in Taipei, Taiwan - 63 years old
MBA from Harvard
Was a banker before entering government
White House Fellow
Deputy Administrator, US DOT Maritime Administration - 1986-1988 under Reagan Administration
Chairwoman, Federal Maritime Commission - 1988-1989 under Reagan Administration
Deputy Secretary, US DOT - 1989-1991 under George H. W. Bush Administration
Director, Peace Corps - 1991-1992 under George H. W. Bush Administration
President & CEO of United Way - 1992-1996
Secretary, US Department of Labor - 2001-2009 under President George W. Bush - served entire eight-year term
Fellow, Heritage Foundation
Serves on numerous corporate and non-profit boards; media commentator
Married to Senate Majority Leader Mitch McConnell (R-KY)
Congress has returned from its Thanksgiving break and is expected to continue the post-election Lame Duck session through at least December 9. The primary "must-do" item for the Lame Duck session to tackle is funding for FY'17. The current short-term extension of FY'16 funding expires on December 9. It appears that Congress is leaning towards passing another short-term, government-wide Continuing Resolution (CR) through March 31,2017, rather than a full-year CR or actual FY'17 funding bills. This is because Republican leaders in Congress want to have an opportunity to revisit the federal agency funding levels once the new Congress convenes on January 4 and President-elect Trump is sworn-in on January 20.
Unfortunately, for transportation programs this means the $900M increase in highway investment and $600M increase in transit funding called for by the FAST Act and included in the House and Senate FY'17 transportation funding bills would be delayed at least until spring. It also means it is highly unlikely that US DOT will announce or release any FAST Act FY'17 competitive grants until next April or May under the new Administration.
In positive news, there seems to be an agreement to include funding for the Flint water crisis in the new CR rather than keep it in the pending Water Resources Development Act (WRDA) bill. Removing the controversial provision may make it easier for Congress to complete action on the WRDA bill, which funds Army Corps of Engineers water projects, before the Lame Duck concludes.
Congress is still trying to complete the conference on the comprehensive energy reform bill. Any legislation that is not signed into law before the 114th Congress concludes in December dies and must be reintroduced next year.
A number of key committee leadership positions have been finalized. Senator John Barrasso (R-WY) will take over as the chair of the Senate Environment & Public Works Committee replacing term-limited Jim Inhofe (R-OK). And Senator Tom Carper (D-DE) will take over as ranking Democrat replacing the Barbara Boxer (D-CA) who is retiring.
Senator Pat Leahy (D-VT) will become the ranking Democrat on the Appropriations Committee, Senator Dianne Feinstein (D-CA) will take over the ranking spot on the Judiciary Committee, Senator Mark Warner (D-VA) will become the ranking member on the Intelligence Committee and Senator Claire McCaskill (D-MO) will become the senior Democrat on the Homeland Security Committee.
In the Senate, Democrats have elected Senator Chuck Schumer (D-NY) as Minority Leader, Senator Dick Durbin (D-IL) as Minority Whip, and Senator Patty Murray (D-WA) as Assistant Minority Leader.
In the House, Republicans re-elected Rep. Paul Ryan (R-WI) as their candidate for Speaker of the House. The full House will vote on his election when the 115th Congress convenes in January. House Democratic leadership has postponed leadership elections until November 30. At least one member has announced a challenge to Minority Leader Nancy Pelosi.
Chairman Bill Shuster (R-PA) of the House T&I Committee announced that Matt Sturgis will become the new full committee staff director.
FTA has released a new, how-to video for those with questions about how to apply to FTA's Core Capacity Improvement grant program. The presentation provides an overview of the grant program, offering an in-depth training on project eligibility, completing steps in the process, and project evaluation and rating. It synthesizes the requirements in law, regulation, policy guidance and FTA's application procedures in an easy-to-understand format. Core Capacity projects, which fund substantial, corridor-based investment in existing transit systems, are one of three types of projects authorized under the Capital Investment Grant Program.
On November 21, FRA proposed updates for the passenger train safety standards used for high-speed trains that can travel up to 220 miles per hour. The proposed updates would establish a new category of passenger equipment, Tier III, for trains traveling up to 220 mph. The updates would offer an alternative method for evaluating how well passengers and crews are protected in an accident, often called crashworthiness. Public comments must be received within 60 days. Although Tier III trains will be required to have exclusive track to operate at speeds above 125 mph, the new standards will allow Tier III trains to safely share track with current Tier I and Tier II commuter, intercity and Acela trains. Here is a link to the proposed updates.
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Congress is back in town this week for a post-election Lame Duck session. Although the new 115th Congress will not be sworn in until early January, the newly elected freshmen members will start their orientation and several party leadership elections will take place. Since Republicans will control the presidency and both houses in the new Congress, there is little incentive for them to accomplish much during the remainder of this session. However, one critical "must-do" agenda item is dealing with the FY'17 appropriations. Currently, the entire federal government is operating under a temporary Continuing Resolution (CR), which expires on December 9 . There are two different approaches under consideration:
The outlook for other pending legislation, such as an expiring tax extenders bill, WRDA authorization for Corps of Engineers and other water projects, comprehensive energy reform bill, and DOD authorization, is unclear. Any legislation that is not completed before Congress adjourns for the session at the end of the year dies and must be reintroduced in the new Congress.
President-elect Trump has identified the leaders of his transition team and is starting to name some key appointments. Here is a link to the Trump transition website. Two people have been named to date to manage the US DOT transition. Shirley Ybarra will lead the agency review team and Martin Whitmer will be responsible for overseeing transportation policy. Shirley is a senior transportation policy analyst with the Reason Foundation, a DC think tank. She previously served as the Deputy Secretary and then Secretary of Transportation in Virginia under Governors Gilmore (R) and Allen (R) and as a political appointee at US DOT during the Reagan Administration. Martin runs his own consulting firm, Whitmer and Worrell. He previously served at US DOT during the George W. Bush Administration working for Secretary Norm Mineta. Before that, he worked at ARTBA, a transportation industry association, where he managed government affairs and the Pubic Private Ventures Division. Both have been long-time champions of P3 legislation and projects.
Donald Trump talked frequently about being a big supporter of infrastructure investment on the campaign trail and even highlighted it in his election night acceptance speech. He is a builder and a developer, so he knows the industry well. Given the bi-partisan nature of infrastructure, there is a growing belief that infrastructure may become a "healing" issue that can bring both parties together in the new Congress for an early, big win for both sides.
However, it is important to note that the Trump campaign plan for transportation is a private sector financing plan, not a government funding plan. His $1 trillion campaign proposal, as currently written, does not include a federal gas tax increase or a solution to stabilize the Highway Trust Fund fiscal cliff, which will occur at the end of the FAST Act authorization if no measures are taken to increase revenue. Rather, it is dependent on tax reform, tax credits, and debt financing. This is not the traditional way most transportation programs have been funded and it may not benefit projects, such as transit and routine highway work, which currently do not have a revenue stream to pay back the loans.
A number of election results have been finalized since the November 9 Washington Update. They include:
In the US Senate , New Hampshire incumbent Senator Kelly Ayotte (R) was defeated by Maggie Hassan (D), the outgoing governor. This currently gives Republicans 51 seats, Democrats 46 seats, and Independents (who caucus with the Democrats) 2 seats. There will be a runoff election in Louisiana on December 10 for the open seat currently held by a Republican to fill the final Senate seat.
At this time, Democrats have a net gain of two seats. Although Republicans remain in the majority, most critical legislation requires a supermajority of 60 votes to pass which will require some Democratic support.
In the US House , Republicans will hold approximately 238 seats to the Democrats 193 seats with 4 races still undecided or subject to a recount. This will be a net gain of five or six seats for the Democrats.
Republicans will retain control of both the House and Senate, although Democrats had a net gain of seats in both bodies. However, due to retirements and term limits, there will be a number of changes to key committee leadership.
In the Senate :
Environment & Public Works Committee - Chairman Jim Inhofe (R-OK) is term limited and the senior Democrat Barbara Boxer (D-CA) is retiring. Next in line for chair is either John Barrasso (R-WY) or, possibly, Shelley Moore Capito (R-WV). For Democrats, the ranking member will likely be either Tom Carper (D-DE) or Ben Cardin (D-MD).
Senate Banking Committee (has jurisdiction over transit) - Chairman Richard Shelby (R-AL) is term limited. Mike Crapo (R-ID) is next in line to replace him. Sherrod Brown (D-OH), the senior Democrat, is expected to remain in that role.
Senate Commerce Committee (has jurisdiction over rail, aviation and highway safety) - The current leadership of Chairman John Thune (R-SD) and Bill Nelson (D-FL) are expected to continue. However, the Aviation Subcommittee Chair, Kelly Ayotte (R-NH), lost her election.
Senate Finance Committee (has jurisdiction over taxes) - The current leadership of Chairman Orrin Hatch (R-UT) and Ron Wyden (D-OR) is expected to remain the same.
Senate THUD (US DOT) Appropriations Subcommittee - The current leadership of Susan Collins (R-ME) and Jack Reed (D-RI) is likely to remain the same unless they opt to move to other subcommittees.
In the House :
House Transportation & Infrastructure Committee - The "Big 4" leadership is expected to stay the same - Chairman Bill Shuster (R-PA) and ranking Democrat Peter DeFazio (D-OR) and Highways & Transit Subcommittee Chairman Sam Graves (R-MO) and ranking Democrat Eleanor Holmes Norton (D-DC). However, Bob Gibbs (R-OH) is term limited as Chair of the Water Resources Subcommittee. There will be nine vacancies on the T&I Committee: six Republican seats and three Democratic seats. Chairman Shuster will be term limited in 2018.
House THUD (US DOT) Appropriations Subcommittee - The current leadership of Mario Diaz Balart (R-FL) and David Price (D-NC) is likely to remain the same unless they opt to move to other subcommittees. Rep. Rodney Frelinghuysen (R-NJ) is expected to become the new full Committee Chairman replacing Hal Rogers (R-KY) who is term limited.
House Energy & Commerce Committee - The current chair Fred Upton (R-MI) is term limited. Reps John Shimkus (R-IL) and Greg Walden (R-OR) are competing to replace him.
House Ways & Means Committee (has jurisdiction over taxes) - The current leadership is expected to continue with Chairman Kevin Brady (R-TX) and Sander Levin (D-MI).