The one major transportation program that was significantly expanded in last week's new surface transportation bill was TIFIA, the federal loan program meant to complement other forms of financing for major transportation projects. Funding for this loan pool was increased from $122 million annually to $750 million in the first year and $1 billion in the second. But in expanding the program, Congress also transformed the program from one in which performance critieria were used to select which proposals most deserved tax dollars into a first-come-first-served pool that will no longer prioritize projects that provide the most public benefits.
In past years TIFIA has had far more applications for funds than were available, especially because of billions of dollars in eligible applications seeking to build private toll roads. Many of these applications, previously rejected because they couldn’t compete based on broader performance criteria, can now be quickly resubmitted. Newly eligible transit systems like LA’s, by contrast, must navigate new rules for public revenue sources and grouped project applications, and may wind up being too late to receive a penny. When next year’s project list is announced, TIFIA may come to stand for “Tolling Is Faster In Applications.”
There are downsides to converting TIFIA into a financing pool for the first applications that show they can generate a profit. Transportation systems are interconnected and create externalities that aren’t reflected in the bottom line of each individual project. The benefits of the FasTracks light rail system in Denver, for instance, include encouraging more efficient compact development and reducing the number of cars on the road at peak commuting hours. That added value is nowhere expressed on the ledger of its credit worthiness. A new toll road, while generating profits, may also generate more pollution and asthma. It may leave poorer drivers who can’t pay higher tolls stranded. A new toll highway in Seattle will reportedly divert large volumes of toll-avoiding traffic onto overburdened downtown streets. The point isn’t that new toll roads are necessarily bad – they’re not – but that none of the externalized costs or benefits will be considered under the new rules.
A program that ignores externalized costs and benefits will be biased toward projects that impose their true costs on the general public. Projects that include public benefits that can’t be monetized and transferred to creditors will be at a disadvantage. It is a win for the investment banks and law firms that lobbied for these provisions, but a loss for the public interest.