The Impact of MAP-21 on the Construction Industry

MUTCD_W20-1.svgThere has been quite a bit of uncertainty in the transportation construction industry over the past few years. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) was a bill to provide funding and authorization for federal surface transportation projects. The SAFETEA-LU law was enacted on August 10, 2005 and expired on September 30, 2009 and provided over $286.4 billion in funding for highway and transit projects. For nearly three years SAFETEA-LU managed to stay afloat through a series of short term extensions. The impending expiration of each extension threatened millions of jobs and the suspension of thousands of active projects.

On July 6, 2012 President Obama signed into law the Moving Ahead for Progress in the 21st Century Act (MAP-21) which was a bill passed by Congress on June 29, 2012. The signing of this bill into law provided the tenth and final extension of SAFETEA-LU which expired on September 30, 2012 with MAP-21 going into effect at the beginning of the current fiscal year that began on October 1, 2012. MAP-21 provides $105 billion in funding for fiscal years 2013 and 2014. While this isn’t the long term solution that many had hoped for, it does provide some much-needed stability to the construction industry. The passage of MAP-21 is expected to save nearly 1.9 million jobs and create one million additional new jobs. These numbers are based on the US DOT’s assumption that every $1 billion of Federal highway funding matched by State and local investments will support 34,779 jobs and that every $1 billion in Federal transit funding similarly matched provides 37,500 jobs.

Let’s take a look at some of the ways MAP-21 will help bolster the transportation construction industry. In addition to preserving and creating nearly 3 million jobs, MAP-21 is also expected to cut some of the red tape involved in getting a project completed by consolidating federal highway programs by two-thirds into four core programs and implementing new reforms to streamline the environmental review process. This includes appointing the US DOT as the lead agency for review and approval of projects, increasing the numbers and types of projects that will no longer require a federal environmental review process, limiting requirements for review by the National Environmental Policy Act and design and right-of-way purchase to begin before final approval. According to the US Department of Commerce, the average federally-aided highway project takes 13 years from concept to completion. By instituting these changes as well as encouraging innovative construction and contracting methods, MAP-21 is expected to reduce project delay and expedite project delivery.

The new law also increases funding amounts for the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. TIFIA provides project financing through secured loans, loan guarantees and lines of credit. MAP-21 increased TIFIA amounts from $122 million per year to a total of $1.75 billion over the next two fiscal years with $750 million and $1 billion available for FY2013 and FY2014 respectively. Some of the major changes to the TIFIA program are going from a criteria based selection process to a rolling, first-come, first-served basis and allowing funding to pay for up to 49% of a project, up from the 33% previously allowed. The US DOT claims that “each dollar of Federal funds can provide up to $10 in TIFIA credit assistance – and leverage $30 in transportation infrastructure investment.” As of this writing, 19 projects have already been submitted for approval for FY2013 funds with a total estimated project value of $27.5 billion. These projects include the $5.9 billion Tappan Zee Bridge for the New York State Thruway Authority and the roughly $6 billion Dulles Metrorail project for the Metropolitan Washington Airports Authority.

The passage of MAP-21 does provide breathing room to those working in the transportation construction industry. It isn’t the five-plus year funding program many were hoping for, but it is a much better stopgap than the repeated short-term extension that the industry has had to deal with over the past three years. The program keeps funding amounts at their current level with a small increase in FY2014 to account for inflation. The equity program to allocate funding has been eliminated and distribution of funds will be based on the FY2012 allotments. For FY2014 each state will receive 95% of each dollar that the individual state’s highway users pay to the highway trust fund (HTF) of which 90% comes from the federal fuel tax.

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Photo courtesy of NCDOT

Funding for MAP-21 has also been an issue and it is expected that $18.8 billion will have to be transferred from the general funds over the next two fiscal years to help cover funding. The HTF isn’t bringing in enough money to remain solvent in the coming years. This is due in large part to the fact that federal fuel tax revenues aren’t based on the cost per gallon of gas but rather on cents per gallon. With vehicles getting better fuel economy and the fact that federal fuel tax rates haven’t been increased since 1993, HTF funds will continue to be an inadequate source of funding for surface transportation projects.

With the election just behind us, it’s never too early to start planning for MAP-21’s successor. If SAFETEA-LU’s 10 extensions over three years wasn’t enough of an indicator of how long it takes Congress to pass legislation we can also take a look at SAFETEA-LU’s predecessor, the Transportation Equity Act for the 21st Century (TEA-21). TEA-21 ran from June 8, 1998 to September 30, 2003 and had to be extended 12 times over two years before SAFETEA-LU was passed. With MAP-21 expiring on September 30, 2014, the 113th US Congress might want to get started on the next iteration of their surface transportation bill. If they start in January they might actually be able to get something signed into law without ever having to extend MAP-21. One of the keys to MAP-21 getting passed, other than the fact that it would have been detrimental to the economy, was that it contained no earmarked projects so there was zero chance of have another “Bridge to Nowhere” debacle.

To learn more about the Moving Ahead for Progress in the 21st Century you can visit the US DOT MAP-21 website.

To find out more about current and upcoming transportation projects in your area, please visit us at www.cdcnews.com.

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