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Out of Control Policy Blog Archives: 7.8.12–7.14.12

DoJ Chokes Wireless Broadband to “Save” Wireline

It’s come to this. After more than a decade of policies aimed at reducing the telephone companies’ share of the landline broadband market, the feds now want to thwart a key wireless deal on the remote chance it might result in a major phone company exiting the wireline market completely.

The Department of Justice is holding up the $3.9 billion deal that would transfer a block of unused wireless spectrum from a consortium of four cable companies to Verizon Wireless, an arm of Verizon, the country’s largest phone company.

The rationale, reports The Washington Post’s Cecilia Kang, is that DoJ is concerned the deal, which also would involve a wireless co-marketing agreement with Comcast, Cox, Time Warner and Bright House Networks, the companies that jointly own the spectrum in question, would lead Verizon to neglect of its FiOS fiber-to-the-home service.

There’s no evidence that this might happen, but the fact that DoJ put it on the table demonstrates the problems inherent in government attempts to regulate competition.

For years, broadband competition has been an obsession at a number of agencies, starting with the FCC but also addressed by DoJ, the Federal Trade Commission, Congress and the White House. Federal policies such as UNE-P, network neutrality, spectrum set-asides and universal service funding have all sought to artificially tilt the competitive advantage toward non-incumbent providers, regardless of their overall financial viability (think Solyndra). State and local officials took the cue, and state public utilities commissions developed their own UNE-P-type set-ups and endorsed fiscally suicidal municipal broadband projects, all aimed at providing competitive alternatives to "monopolistic" telephone company broadband service.

So there’s some regulatory whiplash when a major government agency says that a competitively weak Verizon would be bad for consumers.

Nonetheless, this is pure supposition. Verizon shows every sign of remaining a significant competitor. The company is upgrading its FiOS service, offering speeds of up to 300 Mb/s. The Newark Star-Ledger, citing data from the New Jersey Board of Public Utilities, in June reported that cable companies are losing subscribers to FiOS, in the Garden State and the nation. “Verizon FiOS ate up market share in Jersey and the nation, growing nearly 20 percent through 2011 in Jersey, even better than the national gain for paid TV by telecommunications companies, up 15 percent,” the Ledger states.

Balanced against DoJ’s academic speculation is the fact that the cable spectrum is sitting unused amid a dire spectrum crunch. Wireless demand is booming, yet the government’s penchant for precautionary regulation is getting in the way of market-based solutions to real-world problems.

Moreover, as Scott Cleland points out on his blog, the Verizon-cable deal will create more competition as it will allow the four cable companies to bundle wireless service with cable. “The Verizon-Cable spectrum transaction, as currently configured,” Cleland writes, “is now a series of integrated secondary market transactions that result in multiple competitors gaining access to spectrum that they need, which will enable them to offer faster and more competitive broadband offerings, greatly benefiting American consumers.”

Even President Obama’s notoriously activist FCC cleared the spectrum sale, stipulating only that Verizon swap some of the acquired spectrum with T-Mobile (perhaps to abate some of the consequences of the FCC’s competition-obsessed decision to kill T-Mobile’s merger with AT&T, a rant for another day). But that condition itself implied an understanding that getting additional spectrum in play is a paramount goal.

 

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DirecTV's Viacom Gambit

I suppose there’s something to be said for the fact that two days into DirecTV’s shutdown of 17 Viacom programming channels (26 if you count the HD feeds) no congressman, senator or FCC chairman has come forth demanding that DirecTV reinstate them to protect consumers’ “right” to watch SpongeBob SquarePants.

Yes, it’s another one of those dust-ups between studios and cable/satellite companies over the cost of carrying programming. Two weeks ago, DirecTV competitor Dish Network dropped AMC, IFC and WE TV. As with AMC and Dish, Viacom wants a bigger payment—in this case 30 percent more—from DirecTV to carry its channel line-up, which includes Comedy Central, MTV and Nickelodeon. DirecTV, balked, wanting to keep its own prices down. Hence, as of yesterday, those channels are not available pending a resolution.

As I have said in the past, Washington should let both these disputes play out. For starters, despite some consumer complaints, demographics might be in DirecTV's favor. True, Viacom has some popular channels with popular shows. But they all skew to younger age groups that are turning to their tablets and smartphones for viewing entertainment. At the same time, satellite TV service likely skews toward homeowners, a slightly older demographic. It could be that DirecTV’s research and the math shows dropping Viacom will not cost them too many subscribers.

This is the new reality of TV viewing. If you are willing to wait a few days, you can download most of Comedy Central’s latest episodes for free (although John Bergmayer at Public Knowledge reports that, in a move related to the DirecTV dispute, Comedy Central has pulled The Daily Show episodes from its site, although they are still available at Hulu).

What’s more, in a decision that should raise eyebrows all around, AMC said it will allow Dish subscribers to watch the season premiere of its hit series Breaking Bad online this Sunday, simultaneous with the broadcast/cablecast. This decision should be the final coffin nail for the regulatory claim of “cable programming bottleneck.” Obviously, studios have other means of reaching their audience, and are willing to use them when they have to.

Meanwhile, a Michigan user, commenting on the DirecTV-Viacom fight, told the MLive web site that “I love [DirecTV] compared to everyone else. I get local channels, I get sports channels. I wouldn't have chosen if it was a problem.”

Now if Congress or the FCC steps up and requires that satellite and cable companies carry programming on behalf of Hollywood, the irony would be rich. Recall that just a few years ago, Congress and the FCC were pushing for a la carte regulation that would require cable companies to reduce total channel packaging and let consumers essentially pick  the ones they want. Even the Parents Television Council is glomming onto this, as reported in the Washington Post, although not precisely from a libertarian perspective.

“The contract negotiation between DirecTV and Viacom is the latest startling example of failure in the marketplace through forced product bundling,” said PTC President Tim Winter in a statement calling on Congress and the FCC to examine the issue. “The easy answer is to allow consumers to pick and pay for the cable channels they want,” he said.

Winter’s mistake is that he views DirecTV’s challenge to Viacom as marketplace failure. Quite the contrary, it is a sure sign of a functional marketplace when one party feels it has the leverage to say no to a supplier’s aggressive price increase. And while I would be against a ruling forcing cable and satellite companies to construct a la carte alternatives, market evolution may soon be taking us there, but perhaps not the way activists imagined.

I’ll hazard a guess to say that today’s viewer paradigm isn’t so much “I never watch such-and-such a channel” than “I only watch one show on such-and-such a channel.” When Dish cuts off AMC and DirecTV cuts off Comedy Channel et al, they are banking that their customers won’t miss the station, just a handful of shows that they will be motivated enough to find elsewhere, if they haven’t done so already.

It might take a pencil and paper, but there is enough price transparency for a budget-minded video consumer to calculate the best balance between multichannel TV program platforms like satellite and cable, pay-per-view video, free and paid digital downloads and DVD rentals. The cable cord (or satellite link) may be difficult to cut completely, but the $200-a-month bill packed with multiple premium channel packages is endangered. The video consumer of the near-future might still keep cable or satellite for ESPN for Monday Night Football, but turn to Netflix for Game of Thrones, iTunes forBreaking Bad, and the bargain DVD bin for a season box set of Dora the Explorer videos. DirecTV and Dish Network are confronting these economics by confronting studios on their distribution strategy. The studios, for their part, may find they can’t aggressively exploit other digital channels and keep raising rates for multichannel operators.

While disputes like this are messy for consumers in the short term, the resolution will be a consumer win because it will force multichannel operators and the studios to adapt to actual changes in consumer behavior, not a policymaker’s construct of competitive supply chain. Washington would be wise to stay out.

 

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Bridge to Nowhere Champion Secures Funding for Railroad to Nowhere

The Bridge to Nowhere earmark in the 2005 surface transportation bill substantially changed Congress' approach to legislation. Prior to the change, congressman were perfectly happy with legislation that increased the federal budget as long as their district received “special projects.” While earmarks were used in all kinds of legislation, the problem was most apparent in transportation bill. And 2005’s SAFETEA-LU with the Bridge to Nowhere and the 5,091 other earmarks caused Republicans from Georgia to Idaho to swear off earmarks. 

When the Republicans won control of the U.S. House of Representatives in 2010, they instituted an earmark ban. This year’s Republican class of presidential candidates tried to one-up each other in denouncing earmarks and most other kinds of federal funding. The “Bridge to Nowhere” earmark proved so controversial that former Governor Murkowski proposed a tunnel instead of the proposed bridge. 

However, politicians in our 49th state are both literally and figuratively cut off from the rest of the country. Representative Don Young, who has been Alaska’s representative to the U.S. House since Richard Nixon held the presidency, managed to get funding for a local railroad from the national transportation bill. Young shares Nixon’s talent of getting what he wants without letting a congressional investigation into his conduct or an earmark ban get in his way. 

From Politico:

Alaska Rep. Don Young brought the world the “Bridge to Nowhere.” Call this the Railroad to Nowhere.

Seven years ago, the veteran Republican created a cash gusher for the touristy Alaska Railroad by giving it a share of Congress’s mass transit bucks. In June, he stared down the Senate to keep the subsidies flowing for another two years.

The price tag: $62 million.

Those millions were part of a package meant to help mass transit lines carry commuters, not send cargo and tourists through the Alaskan tundra. And Young pulled it off at a time where member-specific earmarks are supposed to be a thing of the past — a victim, in fact, of the outrage over Young’s much-maligned Bridge to Nowhere that would have connected an Alaskan town to an island of 50 people.

Calling Young defiant would be an understatement:

“Throughout my career in Congress, I have fought hard to ensure a level playing field between Alaska and its lower-48 counterparts — and the Alaska Railroad is no different," Young said in a statement to POLITICO. "There is no reason why the Alaska Railroad should be treated differently than other American passenger rail systems — and that is exactly why this provision is so important." 

Young is wrong on many levels. First, the Alaska railroad is very different from the urban transit projects that this provision was designed for. While many urban mass transit systems such as the New York City subway provide millions of rides a year (The New York Subway provided 1.5 billion rides last year), this Alaska railroad carries only 412,000 passengers a year. And the Alaska railroad is not a transit system that carries passengers from Eagle River to downtown Anchorage. Its main purpose is to carry freight and tourists from Seward along the Gulf of Alaska to Fairbanks in the middle of the state—a distance of 470 miles. If you believe significant number of passengers commute to work along this route, I have some oceanfront property to sell you in Fairbanks. 

While I dislike federal transportation dollars being spent on local transit projects, if we are going to spend resources on these projects, they should actually transport people from home to work. They should not subsidize economic development by taking tourists from Fairbanks to Denali National Park. And it would be extra nice if members of Congress would follow they laws they wrote.

Here is how Young got the money. From Politico:

In 2005, as Americans ridiculed Young's Bridge to Nowhere earmark, few noticed an expensive provision for the Alaska Railroad in the same bill. He made the railroad eligible for mass transit funding based on its number of track miles rather than its number of passengers. The paragraph was buried in a subsection labeled Technical Amendments, and it's been worth tens of millions of dollars a year.

As Congress drew closer to a new transportation deal this year, it looked like Young and the Alaska Railroad were out of luck. The Senate voted to eliminate Young's earmark — and three-quarters of the state's transit funding — prompting Moody's to downgrade the Alaska Railroad's credit. The House kept silent on the earmark.

But in the final round of talks, Young won a concession from the Senate. They drew up a plan that would give Alaska money for its rail system within the city of Anchorage and for a portion of its tracks across the state.

Sources close to the talks said that the earmark ban gave Young an ironic advantage in the endgame. Because other House members weren't asking for special carve-outs, his proved an easy win.

While the railroad’s subsidy will drop from $36 million to $31 million, that $31 million is crucial for a railroad with a net income of $13.4 million last year. 

Unfortunately the earmark ban while important is not sufficient. Congressional members need to read the bill thoroughly to ensure that creatively titled projects like these do not flip through the cracks. Anyone in the lower 48 states who is vacationing in Alaska should remember to ride the Alaska Railroad and send a thank you note to all the taxpayers who helped pay for his visit.

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House Homeland Security Committee Holds Hearings on Airport Security

Yesterday the House Homeland Security Subcommittee held a hearing titled “Perspectives on the future of Transportation Security”. The subcommittee examined ways to improve the Transportation Security Administration. Americans who have flown over the past ten years have experienced the security screenings operated by the TSA.

Chairman Mike Rogers (R) from Alabama who oversaw the hearing offered this opening statement (part below):

Let me start by saying that giving up on TSA without having something better to fill its place is not an option.

For all of its faults, the fundamental reason TSA was set-up after 9/11 was to deploy enhanced security measures to prevent another attack on aviation.

That security mission is just as important today, if not more important than it was eleven years ago.

Having said that, letting TSA carry on the way it has for the last eleven years is equally not an option.

TSA’s poor conduct is sending a strong message to American taxpayers. 

That message is: TSA doesn’t care or doesn’t know how to best serve and protect the traveling public.

I am convinced we need to undertake major reforms to the federal government’s role at our airports.

Several experts testified including my colleague Bob Poole. Bob’s full testimony is available here. Bob discussed four major topics. The first is TSA’s conflict of interest:

I served as an advisor to the House Transportation & Infrastructure Committee in the days following the 9/11 attacks, as Congress was grappling with how to improve aviation security. The legislation that created the TSA—the Aviation & Transportation Security Act (ATSA) of 2001—built in a conflict of interest in the new agency. On the one hand, TSA is designated as the agency that establishes transportation security policy and regulates those that provide transportation operations and infrastructure (airlines, airports, railroads, transit systems, etc.). But on the other hand, TSA itself is the operator of the largest component of airport security—passenger and baggage screening.

When it comes to screening, therefore, TSA has a serious conflict of interest. With regard to all other aspects of airport security—access control, perimeter control, lobby control, etc.—security is the responsibility of the airport, under TSA’s regulatory supervision. But when it comes to screening, TSA regulates itself. Arm’s-length regulation is a basic good-government principle; self-regulation is inherently problematic.

The second is how the U.S. is out of step with other countries:

In 2008 the OECD’s International Transport Forum commissioned me to do a research paper comparing and contrasting aviation security in the United States, Canada, and the European Union. In the course of that research, I was surprised to discover that the conflict of interest that is built into TSA does not exist in Canada or the EU countries. If you go to Canada or any of the major EU countries, airport screening looks similar to what you experience at U.S. airports. But the way in which this service is provided and regulated is quite different. In all these cases, the policy and regulatory function is carried out by an agency of the national government, as in the United States. But actual airport screening is carried out either by the airport itself or by a government-certified private security firm. Legally, in Europe airport security is the responsibility of the airport operator. Whether the screening is carried out by the airport or a security company varies from country to country, but in no case is it carried out directly by the national government aviation security agency.

The third is the difference between TSA’s current contracting and performance contracting:

Competitive contracting has been widely used at local, state, and federal levels of government. In recent decades, it has been embraced by elected officials of both parties as a way of achieving greater value for the taxpayer’s dollar. One of the most influential books on the subject was Reinventing Government by David Osborne and Ted Gaebler, advisors to Vice President Gore’s National Performance Review project. Under this approach, a government wanting a service delivered more cost-effectively must define the outcomes it wishes to achieve, leaving qualified bidders free to propose their own procedures and technology for achieving those outcomes. Such contracts typically stress measurement of outcome variables, and often provide financial penalties and bonuses.

By contrast, under the Screening Partnership Program (SPP) set up by TSA’s interpretation of the opt-out provisions in the ATSA legislation, the entire process is micromanaged by TSA. Instead of permitting the airport in question to issue an RFP to TSA-certified firms, TSA itself selects the company and assigns it to the airport. And TSA itself manages the contract with the screening company, rather than allowing the airport to integrate screening into its overall security program, under TSA supervision and regulation. Moreover, TSA spells out procedures and technology (inputs) rather than only specifying the desired outcomes of screening, thereby making it very difficult for screening companies to innovate. Moreover, the ATSA legislation mandates that compensation levels for private screeners be identical to those of TSA screeners.

Finally, Bob offered several steps to improve TSA in the future:

Based on the foregoing assessment, I have two recommendations for improving airport screening.

The most urgent one is to further reform the current SPP. Recent legislation that puts the burden of proof on TSA in denying an airport’s request to opt out of TSA-provided screening is a modest step in the right direction, but does not correct TSA’s overly centralized approach. SPP should be further reformed so that:

·      The airport, not TSA, selects the contractor, selecting the best-value proposal from TSA-certified contractors.

·      The airport, not TSA, manages the contract, under TSA’s overall regulatory oversight of all security activities at the airport in question.

I believe these changes could be made by directing TSA to adopt them as policy changes, without the need to revise the actual language of the ATSA legislation.

Second, I recommend revising the ATSA legislation to remove the conflict of interest that Congress built into that law. The revision would devolve the responsibility for passenger and baggage screening from TSA to individual airports, as part of their overall security program. Airports would have the option of either hiring a qualified screener workforce or contracting with a TSA-certified security firm. As is already standard practice when airports join SPP, current TSA screeners would have first right to screening positions at the airports shifting over, subject thereafter to the airport’s or the company’s rules and human resources policies. This change would produce greater accountability for screening performance and would also bring the United States into full conformity with ICAO regulations.

Other experts who testified include Dr. Richard Bloom and Mr. Rick Nelson. The full list of witnesses and witness testimony is available here.

The TSA has a certain intransigence to improving itself. For example, let us examine privatizing airport security screening. In the past airports were able to privatize their airport screening functions. When TSA chief John Pistole was confirmed as TSA administrator he decided not to expand the private screening beyond 16 airports because he saw no advantage to it. Since an airport had to prove that there was “a clear and substantial advantage to private screening” and Pistole was the official deciding what clear and substantial advantage meant, not a single airport was able to implement private screening between the beginning of his tenure and early 2012. Pistole’s position appeared to contradict ATSA legislation that allows all airports that want to take part in airport privatization to participate.

When Congress passed the FAA reauthorization bill earlier this year, it tried to fix the problem. TSA chief John Pistole is now required to approve airport requests to privatize screeners unless he determines it would harm security. Recently, Pistole approved private screening at Orlando-Sanford airport in T&I leader John Mica’s district. While the approval is a positive sign, as Pistole is ideologically opposed to privatized screening I am worried that in the future Pistole could find bogus reasons to deny contracting out screening.

It is important that the Homeland Security committee and other relevant committees hold hearings to examine how best to improve airport security. The U.S. airport security system could be much better. Countries from Canada to Germany have much to teach us. Burying our heads in the sand and resisting change is not the way to fix our system.

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New at Reason.tv: Public-Private Partnerships in Puerto Rico

Yesterday, my Reason.tv colleagues posted a new video on Puerto Rico's laudable program to entice private investment in public roads, schools and other infrastructure via public-private partnerships:

"At the end of the day, we are benefiting from savings," explains David Alvarez, executive director of the Puerto Rico Public-Private Partnerships (PPP) Authority. "The government is not dedicating more resources to (infrastructure) and the taxpayers are receiving value."

Although vital public projects such as schools, roads, and airports have traditionally been the domain of the government, Alvarez tells ReasonTV "it's important that we incorporate private investment into the infrastructure." He add that PPP projects add nothing to the public debt and are completed faster and more efficiently than traditional government-administered ventures.

The video, featuring Alvarez, is available at both Reason.tv and YouTube, or it can be viewed directly via the link below.

As I detailed in this May post, Puerto Rico's PPP program is one of the most robust out there at the moment. For more details, see:

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Is California Still Going to the Dogs on Pet Groomer Licensing?

In a previous blog post I wrote about an effort to require every pet groomer in the State of California to obtain a state license, along with all the requisite fees, requirements, and arbitrary regulations that go along with that. The bill, SB 969, generated such a backlash from business groups and the grooming industry (although there were doubtless some that supported imposing tougher, higher-cost standards on their current and would-be competitors) that it was watered down so that instead of imposing mandatory licensing it now calls for the establishment of a voluntary state certification program (which means there would still be more needless bureaucracy).

While this is an improvement over the original legislation, since the state would no longer force groomers to jump through all its hoops while driving up costs to businesses (and, ultimately, consumers), it should still give groomers and consumers alike pause (or is that "paws"—sorry, couldn't resist). As I mentioned to a reporter for an article on the legislation in the L.A. Times, the voluntary certification would likely be merely a short-term stepping stone to imposing mandatory licensing in the future, as evidenced by the previous attempt to do just that and the fact that the tendency over the last several decades has been for the number and stringency of government licensing laws and regulations to grow.

Moreover, a state certification programs would be duplicative and unnecessary. There is no shortage of private pet groomer associations and certification organizations, including:

  • International Professional Groomers, Inc.
  • International Society of Canine Cosmetologists
  • National Dog Groomers Association of America
  • Professional Cat Groomers Association of America
  • Northern California Professional Groomers Association
  • Southern California Professional Groomers Association

In addition to offering testing and certification services, organizations like these offer groomers training, continuing education, and mentoring programs. Voluntary (private) certification allows groomers to meet certain standards and advertise their competency to consumers, while still leaving groomers and consumers free to choose whether certain certification is necessary to do the job. This allows for the greatest competition, the lowest prices, the most consumer choice, and the greatest economic opportunity and freedom to work in the occupation of one's choosing. Businesses that offer shoddy work will suffer from their bad reputations and cease to be in business, and if harm is done to pets owners may seek legal recourse. (Aggrieved pet owners may even be able to avoid the legal system and receive just compensation for themselves and punishment for the negligent groomer by enlisting the aid of certification organizations or groups such as the Better Business Bureau.)

The L.A. Times column also cited my 2007 occupational licensing study, which, in addition to outlining the economic and moral arguments against mandatory (government) licensing, contained a fairly comprehensive listing of which occupations require licenses from each of the 50 states. By this metric, California was the most regulated state in the nation, requiring licenses for 177 occupations—nearly double the national average of 92. This should not be surprising for a state that consistently places at or near the bottom in surveys of state business climates.

In light of its poor business climate, California should be looking to expand economic opportunities and freedom, not restrict them. Especially in an economic climate like today's where there is such a concern for jobs, jobs, jobs, state and local governments should simply get out of the way and remove licensing and other harmful business regulations.

One groomer quoted in the L.A. Times article probably said it best:

"I want the government out of my salon," said Johnny Ray, co-owner of the Dog House in North Hollywood. "It's just a money grab."

Related Research and Commentary:

» "State is barking up wrong tree on pet groomer licensing" (U-T San Diego op-ed)

» "Bill would hound pet groomers" (Orange County Register editorial)

» "California Bill Proposes Licensing for Pet Groomers" (Reason.org blog post)

» Occupational Licensing: Ranking the States and Exploring Alternatives (Policy Study)

» "California Licenses Most Jobs in Nation" (Los Angeles Business Journal op-ed)

» "Lawyer Licensing Laws Lead to Higher Prices, Less Consumer Choice and Access to Legal Services" (Reason.org blog post)

» "Occupational Licensing and the Beard Trimming Turf War in Texas" (Reason.org blog post)

» "State Licensing Mandates for Movers in Illinois Increase Prices, Reduce Job Opportunities" (Reason.org blog post)

 

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TIFIA Changes In Transportation Bill Are a Step In the Right Direction

The National Journal's Transportation Blog asks if there are any benefits from Congress' recent modifications to the Transportation Infrastructure Finance and Innovation Act (TIFIA) program? 

Various smart growth and transit groups are upset about the changes Congress made to the federal TIFIA program, in particular, changing the criteria for TIFIA loans from a laundry list of factors (including livability and sustainability) to primarily financial feasibility. But these changes restore TIFIA to what it was originally intended to be-not an all-purpose transportation loan program but a way to leverage limited federal dollars to support big-ticket infrastructure improvements.

The large increase in TIFIA's budget (from $122 million per year to $750 million next year and $1 billion the following year) is a response to demand from state Departments of Transportation (DOTs) greatly exceeding the program's capacity in recent years. And the streamlined criteria will make USDOT's decisions about which projects to fund more straightforward and less subject to politicization based on inherently subjective factors introduced by the Obama administration that Congress has now deleted.

I had to laugh at the suggestion by Tri-State Transportation Campaign's Steven Higashide that the reformed TIFIA program will likely fund "roads to nowhere." Most state DOTs these days are so strapped for funding that they are hardly building any new roads. And the ones that they hope to build with TIFIA assistance are anything but boondoggles. That is thanks to the basic financial feasibility requirements that are unchanged in the expanded program. Specifically, a project can only qualify for a TIFIA loan if it has (1) a dedicated revenue stream, and (2) an investment-grade rating on its senior debt.

Most of the highway projects TIFIA is funding are either new toll roads or the addition of congestion-priced express toll lanes to existing expressways (such as those nearing completion on the Capital Beltway outside Washington, D.C.). The projected toll revenue stream is intended to pay back the investment-grade senior debt and the TIFIA loan, and (if there is any revenue beyond that) to provide a return to the equity investors in the project.

This kind of revenue-based financing is something of a revolution in highway funding, compared with the historic tax-and-grant system that is increasingly becoming unsustainable, as fuel tax revenues lag ever further behind the costs of building, maintaining, and modernizing highways. And TIFIA is now poised to spread this revolution, thanks to the increased budgetary authority Congress has provided.

My only real concern about Congress's changes is that it increased the fraction of a project's budget that can be funded by a TIFIA loan from the previous 33 percent to 49 percent. The purpose of TIFIA has been to provide "gap financing" for economically and financially sound projects that could not quite make their budget numbers work with conventional debt. Upping that fraction to nearly half may well reduce the pressure on state DOTs and metropolitan planning organizations (MPOs) to commit their own resources to candidate projects, potentially reducing such projects' financial soundness and thereby increasing the risk to federal taxpayers. Were I a part of the USDOT credit council reviewing TIFIA applications; I would give preference to projects requesting loans at or below 33 percent.

At a time when the handwriting is on the wall for conventional fuel tax-based highway grants, the shift to loans and financial soundness criteria is an important step in the right direction.

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Why are Environmental Groups so Upset with new Transportation Bill?

As details of the recently passed transportation bill leaked out, some Environmental activists released press releases equating the bill to Armageddon.

According to Streetsblog:

In H.R.7 – the transpo bill so backwards even the House couldn’t pass it — the roads-only crowd threw transit riders under the bus, as it were, eliminating dedicated funding for transit, which was left to fend for itself off scraps from the general fund. 

The best thing one can say about the bill issued by the conference committee last night is that it doesn’t include that draconian measure. But it sure doesn’t do anything to move transit forward in this country. 

The Sierra Club concurred:

“House Republicans extracted concessions that will keep our transportation system stuck in reverse. By rolling back critical environmental review laws, they’ll curtail the public’s ability to have a say on highway and bridge projects

in their communities. By undermining efforts to make biking and walking safer and keep our roads and bridges in good repair, they’ve done their best to ensure we remain dependent on oil and a crumbling infrastructure...One of the few good things you can say about this bill is that it could have been worse.” 

These press releases sound as if House Republicans created some kind of monster. The only problem is none of the claims are true. Environmental interests are upset for three major reasons: Transportation Enhancements, Complete Streets and Environmental Streamlining. 

The Transportation Enhancements program that environmentalists love survives in the new Transportation Alternatives program. Funds may still be used to design on and off road bicycle and walking trails. Most of these trails are related to recreation not transportation. The bill continues to fund the conversion of abandoned railroad corridors to trails and the rehabilitation of historic transportation facilities. All forms of pollution abatement, stormwater management and aquatic habitat restoration are also eligible for federal funds. States are no longer mandated to devote two percent of their funds to solely trails and bicycle paths. Now they can use the money for boulevards as well! But one useless program has finally been killed. Local municipalities are no longer allowed to use federal funding for transportation museums. No more federally supported transportation museums? The world is going to end! 

Although the Complete Streets provision was eliminated, the Highway Safety Improvement Program includes Complete Streets language in its wording. In the end the specific program has been eliminated, while the program’s goals live on in a different form. 

The compromise bill also contained some, but not all, of the streamlining provisions that House Republicans wanted. The final bill does not contain hard deadlines on environmental review as Republicans wanted. However, it does reduce budgets of agencies that deliberately delay review. (In other words federal agencies can no longer use stalling tactics to delay projects that are environmentally safe but disliked by environmental advocates.) 

None of these program changes are major. The federal transportation bill still devotes a great deal of funding to local priorities such as local transit systems and non-motorized transit instead of national needs. Why are some groups so upset when the only program denied funding is transportation museums? 

The major goal of some environmental groups is to delay any highway project regardless of environmental facts or actual needs. While many environmental groups’ programs are still funded, this bill finally stops the trend of funding less for significant infrastructure and more for environmental goals. That funding for environmental goals failed to increase shows that the environment at all costs movement is losing its influence. To show how out of touch these groups are, all 187 House Democrats, regardless of their support for environmental causes, voted “YES” on the HR4348 conference report. While some of them undoubtedly disliked certain portions of the bill, none succumbed to voting “NO” due to political pressure from certain environmental groups. All 74 Democrats present in the Senate also voted “YES”. 

Meanwhile, 52 house republicans and 19 senate republicans voted “NO” on the conference report. Many of these Republicans thought the bill had not gone far enough at eliminating waste. Republicans were also upset with the budget gimmickry where bill authors used $19 billion of projected general fund monies from pension relief over ten years to fund a two-year bill. This borrowing of imaginary money in the future is very poor fiscal policy. Congressional staffers need to start researching reform and different revenue sources soon. A major fiscal challenge awaits the next transportation bill. 

The environmental groups have become the boy who cried “Wolf”. In that story as in real life, sane people stop listening. Barbara Boxer, the Conference Committee chairman, ignored full-page newspaper advertisements and press releases from environmental groups warning of dire consequences of passing the conference report. The report’s unanimous passage by Democrats and signature by a Democratic President is a compelling statement of the loss of power by these groups. While the bill has significant problems, the influence of transportation groups rather than environmental groups is a step in the right direction.

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