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July 5, 2012

MAP-21 -- Major Programmatic and Policy Changes

The long-awaited transportation reauthorization bill Moving Ahead for Progress in the 21st Century Act (MAP-21) passed the U.S. Senate and the U.S. House of Representatives on June 29, 2012. The full text and summary document of the conference report are available on-line. The following Policy Update details some of the specific programmatic and policy areas of the bill and compares them to Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the last major transportation reauthorization passed in 2005. We would like to thank members of Congress and especially our congressional delegation for passing a bill that provides some stability to federal transportation planning and programming for the next two-plus years.

Total Funding Levels and the Highway Trust Fund
MAP-21 authorizes federal transportation funding through September 2014, at an annual level of $52.6 billion. This represents a total increase of close to 5 percent over the SAFETEA-LU annual average from FY 2006-09. Much of this increase is driven by federal transit spending, which will rise 13 percent on an average annual basis, compared to an inflation-indexed 3.13-percent increase for the federal highway obligation limitation. The bill contains no earmarks, which is a major departure from SAFETEA-LU. As such, MAP-21 apportions 92.6 percent of its funds by formula, compared to 83 percent under SAFETEA-LU.

While the total authorization level has increased, the bill fails to address the continuing structural gap between Highway Trust Fund revenues and expenditures. To keep the Highway Trust Fund solvent, the bill makes a one-time transfer of $2.4 billion of gasoline and diesel taxes already collected but deposited to a different fund, as well as an $18.8 billion transfer from the General Fund to the Highway Trust Fund. Post 2014, additional bailouts of the Highway Trust Fund will be necessary if current policy regarding the federal motor fuel tax remains unchanged.

Highway Funding
MAP-21 makes formula apportionments (also known as "contract authority") of the core highway programs to state Departments of Transportation (DOTs) at a level of $37.5 billion in FY 2013 and $37.87 billion in FY 2014. Of this total, Illinois is estimated to receive $1.37 billion in FY 2013 and $1.39 billion in FY 2014. These totals correspond to roughly 3.67 percent of the nation's total formula highway apportionments, an increase from 3.52 percent of the annual national average under SAFETEA-LU.

The total highway contract authority has been reduced with takedowns for various activities including federal credit assistance (i.e., the Transportation Infrastructure Finance and Innovation Act [TIFIA] program), federal lands, Puerto Rico and territorial highways, administrative expenses, emergency relief, ferry boats and terminals, and research. TIFIA is notably funded at $750 million in FY 2013 and $1 billion in FY 2014, compared to $122 million in FY 2012.

One of the important changes MAP-21 makes is to base state apportionments of highway formula funds on each State's share of FY 2012 apportionments, including both formula and earmarked funds. Additionally, criteria for allocating contract authority for individual highway programs have been eliminated; specific percentages are used instead. In FY 2014, the apportionments are adjusted to ensure that each State receives at least 95 percent of its FY 2012 contributions to the Highway Account of the federal Highway Trust Fund. This policy replaces the Equity Bonus program under SAFETEA-LU, which ensured States a 92-percent rate of return on their contributions to the Highway Account.

Under the new law, Transportation Alternatives (see section below for more on this program), Congestion Mitigation and Air Quality Improvement (CMAQ), and metropolitan planning programs are taken off the top of the state's total formula apportionment according to each program's respective below-the-line percentages in FY 2009. The remaining funds are distributed among three core highway programs: 63.7 percent for the new National Highway Performance Program (a consolidated program made up of the former Interstate Maintenance, National Highway System, and Bridge programs), 29.3 percent for the revamped Surface Transportation Program, and 7.0 percent for the Highway Safety Improvement Program.

Note that SAFETEA-LU was extended nine times over the last three years, and the number of programmatic and funding changes over that period makes it difficult to compare the funding apportionments provided by SAFETEA-LU to those provided by MAP-21. CMAP will continue to analyze MAP-21 as more information becomes available at the federal and state level. The table below compares MAP-21 funding levels to current funding levels under SAFETEA-LU across a number of programs at both the national and state level.

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Transportation Alternatives Program
MAP-21 provides that 2 percent of state apportionments be set aside for a new program called Transportation Alternatives, which consolidates the former Transportation Enhancements program with the now-eliminated Safe Routes to School and Recreational Trails programs. Some project types (e.g. transportation museums) are no longer eligible for funding. The Transportation Alternatives program is funded at $809 million in FY 2013, 34 percent less than the combined funding of the equivalent predecessor programs in FY 2011 ($1.2 billion). However, the FY 2011 totals are inflated due to the inclusion of expired SAFETEA-LU earmarks. Ultimately, the 2 percent Transportation Alternatives formula is equivalent to the former enhancements program, which consisted of a 10-percent set-aside of the Surface Transportation Program that in turn represented 20 percent of total highway funding under SAFETEA-LU.

Fifty percent of Transportation Alternative funds will be suballocated to metropolitan areas based on population and the remaining 50 percent will be retained by States. Half of the state portion of Transportation Alternatives funds can be transferred to other highway programs if the program backlog exceeds 150 percent of the annual set-aside, and States can also opt out of the recreational trails component of the program. Metropolitan areas with populations over 200,000 will have project selection authority over the suballocated funds. Thus, while the Transportation Alternatives program devolves some new authority to metropolitan regions and also consolidates programs, these reforms come at the price of reduced overall funds for active transportation.

Transit Funding
Under MAP-21, total public transportation funding totals $10.6 billion in FY 2013 and $10.7 billion in FY 2014. Roughly 80 percent of the funding ($8.5 billion) will continue to come from the Highway Trust Fund, while the remainder ($2.1 billion) will come from General Fund authorizations. The largest of these General Fund transfers is the capital investment grants program, commonly known as the New Starts program, which is funded at $1.9 billion per year. Total transit funding is up slightly more than 1 percent over 2012 appropriations, and 13 percent compared to average FY 2006-09 SAFETEA-LU authorizations.

Urbanized area formula grants make up almost half of all transit funding, and, with the exception of broadened eligibility to include projects from the now-eliminated Job Access and Reverse Commute program, remains largely unchanged from SAFETEA-LU. Funding will total $4.4 billion in FY 2013 and $4.5 billion in FY 2014, an increase from the $4.2 billion appropriated in FY 2012.

MAP-21 transforms the bus and bus facilities program from a discretionary to a formula-based program, with funds allocated based on criteria such as population, population density, bus vehicle revenue-miles, and bus passenger-miles. Total funding for this program is substantially reduced from $984 million in FY 2012 to $422 million in FY 2013, but the new criteria should benefit metropolitan areas with established systems.

Moreover, funding for fixed guideway modernization will be increased from $1.7 billion in FY 2012 to $2.1 billion in FY 2013 and $2.2 billion in FY 2014, and the program would be focused on funding "state of good repair" projects rather than the criteria in the previous rail modernization program. The fixed guideway modernization program has two components: a rail formula program (97 percent of funds) and a "high intensity" bus program for buses running on high-occupancy vehicle lanes (3 percent of funds). The new system will base half of the authorization on revenue vehicle-miles of service and direction route-miles of service, rather than the former funding tiers and earmarks. The other half of the authorization will be based on FY 2011 apportionments. The bill includes a "hold harmless" provision that does not allow an area's funding to decrease by more than a quarter of a percentage point as compared to what the area received the prior year.

Capital investment grants (i.e., New Starts funding) will continue to come from General Fund appropriations. The major change under MAP-21 is that the eligibility for New Starts funding is officially expanded to include "core capacity" projects that increase capacity by at least 10 percent. Bus rapid transit (BRT) projects will also get special treatment under New Starts. Up to three BRT projects that meet "fixed guideway" requirements will be eligible for an 80 percent federal share. Under SAFETEA-LU, BRT projects were typically funded from bus discretionary appropriations.

Private Sector Involvement in Transit
MAP-21 does not include some of the more extensive transit privatization provisions found in theAmerican Energy and Infrastructure Jobs Act, a five-year reauthorization bill considered by the House of Representatives in early 2012. It does not provide grants or financial incentives tied to public-private partnerships for transit. MAP-21 does require the Federal Transit Administration to conduct research, identify best practices, and provide technical assistance on the issue of public-private partnerships in transit.

Employer Transit Benefits
The Senate version of MAP-21 passed in March 2012 included a provision that would have equalized the amount of pre-tax employer-provided mass transit benefits with the amount of pre-tax employer-provided parking benefits ($240 per month), but this provision was dropped in the conference committee report. Pre-tax transit benefits will remain capped at $125 per month.

Performance Measurement
Under MAP-21, U.S. DOT will establish performance measures and state DOTs will develop performance targets in consultation with metropolitan planning organizations (MPOs) and others. The language in the bill stipulates that States must make cost-effective and efficient investments that make progress toward these performance targets. Further, these investments must be made transparently, and States must provide reports that allow the public to "meaningfully assess the performance of the State." MPOs are also required to describe how their Transportation Improvement Program (TIPs) and Long Range Transportation Plans will make progress toward meeting those targets. Overall, while MAP-21 includes more language than SAFETEA-LU about measuring the overalloutcomesof state transportation investments, it does not tie any funding allocations to meeting these evaluation criteria.

MAP-21 allows States to toll new capacity added to the Interstate system, and requires that the number of non-tolled lanes exceed tolled lanes. MAP-21 continues past tolling policy allowing the reconstruction of a non-Interstate federal-aid highway and conversion to a tolled facility, the conversion of high-occupancy vehicle lanes to tolled lanes, the reconstruction or replacement of a bridge or tunnel and conversion to a tolled facility, and federal participation in the initial construction of a new toll facility. The Senate version of MAP-21 passed in March 2012 originally included a number of amendments that would have expanded pricing pilot programs, but these provisions are not included in the final bill.

MAP-21 has significantly expanded the TIFIA program from $122 million annually since 2005 to $750 million in FY 2013 and $1 billion in FY 2014. The TIFIA program supplies low-interest, flexible financing options to major transportation projects via direct loans, loan guarantees, and standby lines of credit. TIFIA assistance must be repaid through a dedicated revenue source such as tolls, sales taxes, or tax increment finance revenues. TIFIA can significantly reduce financing costs and, therefore, overall project costs. It also provides a vehicle for private investment in transportation projects, particularlypublic-private partnerships, and offers an opportunity to leverage regional revenues from user fees, value capture, and other new funding sources.

Additionally, MAP-21 raises the proportion of project costs that TIFIA is permitted to fund from 33 percent to 49 percent. MAP-21 also removes the current use of evaluation criteria for project selection, and projects will now be funded on a first-come, first-served basis. While the TIFIA program is capitalized by the Highway Trust Fund, it should be remembered that these are loans, not grants, and must be repaid with local funds. Further, as an above-the-line takedown, an expanded TIFIA program reduces contract authority to the States through the core formula highway programs.

Environmental Review
MAP-21 also includes several provisions to speed project delivery, mostly by streamlining the environmental review process required under the National Environmental Policy Act (NEPA). Many of the provisions codify initiatives that had already been underway at federal agencies, although some are new.

Perhaps the most significant new streamlining policy is an option to set an upper limit on the length of the environmental review process and to impose penalties on federal agencies for missing these deadlines. For projects that have had environmental impact statements under development for at least two years, a State or other project sponsor can now request additional federal assistance to complete review and reach a record of decision (i.e., environmental clearance to build the project) in no more than four total years. By contrast, theGAO found in 1994that highway projects generally required 2 to 8 years to complete environmental requirements, with an average length of 4.4 years. For other approvals, such as wetlands permits under the Clean Water Act or decisions under the Endangered Species Act, agencies that fail to meet deadlines for granting or denying permits face penalties under the new bill in the form of funding rescissions. These rescissions could, in theory, reach up to 7 percent of the agency office's annual budget.

The bill also reduces the number of required environmental reviews by widening the class of projects that qualify as "categorical exclusions." These projects are considered not to have significant environmental impacts and are automatically exempted from the more intense forms of review required under NEPA (i.e., environmental assessments or environmental impact statements). New categorical exclusions include projects that use less than $5 million in federal funding, projects that involve reconstruction of infrastructure damaged in a disaster, and projects within an existing transportation right-of-way. MAP-21 also requires U.S. DOT to propose additional categorical exclusions through its rulemaking authority soon after the bill's enactment.

MAP-21 also encourages a number of innovative project delivery methods, construction techniques, and other approaches being pursued under the Federal Highway Administration'sEvery Day Countsinitiative. In particular, it continues to encourage "planning" approaches to meet environmental responsibilities, such as the development of programmatic mitigation plans by States or MPOs. These plans would address the potential impacts of projects at a large geographic scale or at a higher level of generality than for individual projects. The bill also makes it somewhat easier to use previous planning work to meet NEPA requirements.

MAP-21 does not include a standalone freight program or dedicated formula funding for freight, but introduces several new provisions to federal transportation policy. In particular, MAP-21 establishes the need for a National Freight Policy, prioritizes freight projects, and recommends the creation of State freight advisory boards and State freight plans. The Projects of National and Regional Significance, a MAP-21 program applicable to freight, was authorized out of the General Fund at $500 million for FY 2013, although it will not be funded at all in FY 2014.

The National Freight Policy program will establish goals and recommend the designation of a National Freight Network. This network will include a Primary Freight Network of key transportation corridors on the Interstate system, not to exceed 27,000 centerline miles, and a network of critical rural freight corridors to connect the Primary Freight Network to freight facilities. MAP-21 directs U.S. DOT to develop a freight strategic plan to assess the conditions and performance of the National Freight Network, identify highway bottlenecks, and estimate the cost of resolving those bottlenecks.

On the financing side, MAP-21 also raises the federal share for eligible projects to 95 percent for projects on the Interstate System, and 90 percent for other eligible projects. Eligible projects include construction and operational improvements for freight, intelligent transportation systems, grade separations, geometric improvements, truck-only lanes, improvements to freight intermodal connectors, and improvements to truck bottlenecks.

Next Steps
As more information becomes available, CMAP will continue to analyze the bill and provide updates through the Policy Updates blog. In the near future, look for an overview piece that compares CMAP's principles for reauthorizationand the final outcome of MAP-21.