Fitch: Long-Term US Transportation Bill an Important First Step

NEW YORK & CHICAGO--(BUSINESS WIRE)-- The multi-year infrastructure funding bill passed last week by Congress is a positive first step toward funding that will allow state Departments of Transportation (DOTs) to plan for longer terms, according to Fitch Ratings. Passage of the bill is the first meaningful indication that Congress recognizes the infrastructure deficit challenge and is willing to act on it, although important details remain to be reconciled between the House and Senate bills.

The bill, the U.S. House of Representatives passed a $325 billion transportation funding measure last week. H.R. 3763, the Surface Transportation Reauthorization and Reform Act of 2015, will extend federal infrastructure programs for the next six years and has funding for the first three. It must be reconciled with the Senate's $342 billion DRIVE NOW Act before November 20, when the current reauthorization of the funding will expire.

The bill's approval would represent a departure from the pattern of short-term extensions that has been in place in recent years. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) became law in 2005 and expired in 2009. Congress renewed its funding ten times before replacing it with Moving Ahead for Progress in the 21st Century Act in 2012.

Resolution of the ultimate funding sources for the bill is important, as it needs to lead to a long-term revenue source that could stabilize the Highway Trust Fund (HTF) program at the level needed to support proactive long-term investment. However, if funding relies on one-time revenues or continued general fund transfers, the bill won't address longer-term challenges facing the HTF due to the inherent structural imbalance between pledge funding and expenditures.

State DOTs and transit agencies also need to plan longer term in regards to their capital needs. Expanded use of tolling and other user fees like vehicle miles traveled fees will be part of the solution, but will certainly not satisfy the overall need. In Fitch's view, a coordinated strategy of tax revenues and surcharges at the state and federal level will remain critical to a viable and sustainable long-term infrastructure policy.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Fitch Ratings
Scott Zuchorski
Senior Director
Global Infrastructure and Project Finance Group
+1 212-908-0659
33 Whitehall Street
New York, NY
or
Rob Rowan
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Media Relations
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Source: Fitch Ratings

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