Following overwhelming House (359-65) and Senate (83-16) approval, on Dec. 4, President Obama signed into law the FAST Act (“Fixing America’s Surface Transportation” Act), an AED-supported five-year, $305 billion initiative (including $207.4 billion for the federal highway program).
Following congressional approval, AED President & CEO Brian McGuire said, “After so many near misses and close calls, so many cans kicked down the road and so many cliffs narrowly averted, we finally have long-term, fully funded highway legislation. The FAST Act is the culmination of more than a decade’s worth of effort by AED and its industry allies. Thanks in particular to all the equipment industry leaders who kept the political pressure on Congress to get the job done.”
McGuire added, “This is more than a philosophical victory. Equipment dealers, manufacturers and their customers can now once again plan for the future. Over the next five years, the hundreds of billions of dollars in federal highway and transit investment guaranteed in the bill will stimulate more than $13 billion in equipment sales, rental and maintenance activity and support more than 4,000 dealership jobs each year.”
Here are the highlights for the construction equipment industry:
- Funding. The FAST Act provides $207.4 billion over five years for the federal-aid highway program, a slight annual increase over MAP-21 (the last surface transportation authorization law). Based on an AED-funded study by Professor Stephen Fuller at George Mason University, we know that each dollar in highway spending generates 6.4 cents in construction equipment market activity (sales, rental, and product support). Consequently, AED projects that the FAST Act will generate $13.27 billion in equipment market opportunity (EMO) for construction equipment dealers over five years. The following table breaks the EMO down by fiscal year:
FAST Act Investment Equipment Market Impact
|Fiscal Year (Oct. 1-Sept. 30)||Federal Highway Apportionment (dollars)||Equipment Market Impact (dollars)|
|2016 (FAST Act)||39,724,000,000||2,540,000,000|
|2017 (FAST Act)||40,544,300,000||2,590,000,000|
|2018 (FAST Act)||41,420,500,000||2,650,000,000|
|2019 (FAST Act)||42,355,400,000||2,710,000,000|
|2020 (FAST Act)||43,369,800,000||2,780,000,000|
|Total for FAST Act (2016-2020)||207,414,000||13,270,000,000|
Despite urging by AED and its industry allies, Congress chose not to replenish the Highway Trust Fund (HTF) by increasing user fees (e.g., increasing the gas tax). Instead, the roughly $70 billion needed to fully fund the FAST Act and supplement the projected five-year HTF shortfall will essentially be a combination of general fund transfers resulting from savings and revenues generated by:
- Passport revocation for “seriously delinquent” taxpayers
- Federal Reserve Board dividend payment reduction and surplus account transfer
- Strategic Petroleum Reserve sale of 66 million barrels of oil
- Customs fees on airline and cruise passengers
- Internal Revenue Service hiring private tax collectors
- Office of Natural Resources Revenue royalty overpayment fix
While five-years of guaranteed funding is welcomed and will restore much needed near-term certainty for transportation construction programs, there is work left to do. AED will continue to work with lawmakers to identify real and sustainable revenue streams to increase and stabilize the HTF for decades to come.
- Permit Streamlining. The Fast Act creates a new Permitting Council to establish best practices and model timelines with the goal of reducing the federal permitting process. The council’s authority extends to any project requiring authorization or environmental reviews from a federal agency involving infrastructure construction for renewable, conventional energy production, electricity transmission, and pipelines as well as surface transportation, aviation, ports and waterways. The hope is that the council will help expedite the approval of a vast array of infrastructure projects. The FAST Act contains several other provisions aimed to expedite the environmental review process.
- Export-Import Bank. The FAST includes a provision to renew and reauthorize the Export-Import Bank through 2019, a top priority for the business community.
- WIFIA Fix. The FAST Act removes a limitation prohibiting projects funded under the Water Infrastructure Finance & Innovation Act (WIFIA) from being funded with tax-exempt financing tools. WIFIA’s effectiveness has been severely hindered by a bar on using tax-exempt financing (such as private activity bonds) to partially fund any project that also receives WIFIA assistance. Since WIFIA loans are only able to fund up to 49 percent of a project, local communities are left with a significant barrier to acquiring the remainder of the financing. The modification will allow local communities to take full advantage of the program by giving the option to use tax-exempt financing and other public-private partnerships in combination with WIFIA funds for major water and wastewater projects.
- Hours of Service. The FAST Act reforms the Federal Motor Carrier Safety Administration’s process for seeking exemptions from burdensome hours of service regulations, including making it more transparent and prompt. Furthermore, the legislation also allows more commercial motor vehicle drivers to take advantage of a shorter “restart” period (24 hours as opposed to 34 hours) by increasing the air mile radius for transporting construction material and equipment from 50 miles to 75 miles.
“The FAST Act is a major victory for transportation advocates and we thank Speaker Ryan for making it the top priority during his first weeks in office. But our work isn’t finished. AED will continue to press Congress to create new, sustainable revenue streams for the Highway Trust Fund to ensure the chaos surrounding the program in recent years is an historical aberration and not the new normal,” said AED’s McGuire.