Restoring the promise

From City Council member to Mayor of his native Charlotte, North Carolina, to Secretary of Transportation, Anthony Foxx has built an impressive resume during the 10 years he has spent in public office. But more importantly, he has established an impressive track record, living up to President Barack Obama’s expectations when he tapped the former litigator to fill the shoes of his predecessor Ray LaHood.

As Mayor of Charlotte, a role he assumed in December 2009, becoming the city’s youngest mayor at the age of 38, Foxx had the opportunity to prepare for his current position, which has him leading an agency with more than 55,000 employees, a $70 billion budget and overseeing air, maritime and surface transportation. Taking over a city that suffered from an unemployment rate in the low double digits, Foxx made investments in transportation infrastructure that created thousands of jobs and supported the city’s economic recovery.

These included the completion of a new runway at Charlotte-Douglas International Airport, the sixth busiest in the US, extending the LYNX light rail system, using a design-build-finance model to procure the Interstate 485 (I-485) outer belt loop and starting the Charlotte streetcar project.

“I grew up in Charlotte in the 1970s and 80s and I was bussed to school because my neighbourhood was in one place and the better educational opportunities were someplace else,” Foxx tells Infrastructure Investor during an interview at the US Department of Transportation’s (USDOT) Washington DC headquarters.

“The streetcar project in Charlotte is a project that says ‘we’re all in this together and there is no part of the community that is better or worse than another one; that is more or less deserving than another one.’ And it reinforces the idea that all parts of the community can contribute to its growth and development,” Foxx remarks.

While the comments are made in reference to the Goldline Streetcar, which began operating this past July, they reflect Foxx’s view of transportation and its role in general, as well as the goals he has laid out for his agency in the upcoming year.

“We have to make sure that our transportation infrastructure is connective tissue,” he asserts. “Making sure that our transportation system is part of the solution to opportunity gaps in this country, that we are putting processes in place to help us build a more connective country is going to be another big deliverable for us over the next year.”

THE NOT SO FAST ACT

While Foxx’s journey from the city and local level to a federal post is an interesting one, the work realised in the past two and a half years provides a lot of ground to cover during our interview, which ironically enough coincides with Congress finally agreeing on a five-year surface transportation bill that President Obama signed into law on December 4, the day of our meeting.

Titled the FAST [Fixing America’s Surface Transportation] Act, the law is the first long-term transportation bill to be passed in 10 years, solid evidence that arriving at this result was anything but a fast or easy process.

Asked if he was satisfied with the new law, Foxx replies: “We have a bipartisan compromise that looks like a lot of compromises: there’s some good, there’s some not so good and there are important things that got left on the cutting-room floor.”

The “good” Foxx refers to includes the fact that state and local governments “heretofore frozen” in terms of planning now have the certainty needed to make long-term decisions. As a result, “I think you’re going to see more job creation, more construction activity on projects that will actually move the dial for the American people,” he says.

According to a summary of the new legislation released by law firm Allen & Overy, the FAST Act aims to improve the process for larger, more complex projects by establishing a new Federal Infrastructure Permitting Improvement Steering Council, with members drawn from multiple federal agencies, including the Secretary of Energy and the Secretary of Defense, in addition to USDOT.

The new council is charged with establishing a list within 180 days of all projects requiring more than $200 million in investment that are pending environmental review.

Another positive component of the FAST Act is the creation of a National Surface Transportation & Innovative Finance Bureau that will – among other things – develop and promote best practices for public-private partnerships (PPPs; P3s), a role the Build America Transportation Investment Centre (BATIC) has been fulfilling since it was launched in September 2014.

“The work we’ve done through that Centre has led Congress to pass a provision that allows us to put that on steroids,” Foxx remarks. “The provision for an innovative financing bureau gives us the Congressionally-designated authority to consolidate our credit programmes, which we were not able to do before.”

The Bureau will administer the Transportation Infrastructure Finance and Innovation Act (TIFIA), the Railroad Rehabilitation & Improvement Financing (RRIF) programme, the new Nationally Significant Freight & Highway Projects (NSFHP) discretionary grant programme and Private Activity Bonds (PABs).

In addition to consolidating these credit programmes, the Bureau will also work towards streamlining permitting. “That is something we’re eager to do as long as it can be done the right way and I think we’re set up very well to help more projects find their way to the private sector as attractive investment opportunities,” Foxx states.

Asked how the Bureau will operate alongside BATIC given the two entities’ overlapping roles, Foxx responds that it remains to be determined whether BATIC continues to stand alone within USDOT or whether it becomes part of the Bureau.

“But I think it’s fair to say that the authorities Congress has given us in this space are going to help build more public-private partnerships,” he remarks.

THE ‘NOT SO GOOD’

Speaking of public-private partnerships, the TIFIA programme has been deemed by both the public and private sectors as a clear success. Yet Congress, in the FAST Act, slashed the programme from $1 billion a year currently to $275 million in 2016, rising slightly to $285 million in 2018 and $300 million in 2019, leading many industry observers to wonder whether this will negatively impact the US P3 market and questioning the rationale behind the reduction.

“Ostensibly the reason for the reduction is because there had been some carry-over from the programme in recent years,” Foxx says. “But as I’ve said repeatedly to members of the conference committee, part of that has been because of Congress. It’s been because there hasn’t been the certainty in place to incentivise state and local governments to put major projects through TIFIA.”

Luckily there is a silver lining to this change, which is a provision included in the new legislation that allows carry-over dollars to be rolled back into TIFIA over successive years. “My hope is that we get a crush of business in TIFIA and that we prove that more funds are needed with Congress eventually coming back to the trough to put more dollars in,” Foxx says.

The 71 percent cut to the TIFIA programme is not the new law’s only shortcoming; another is the level of funding.

“We argued that we needed a sizeable bill. We quantified that in the Grow America Act as $478 billion over six years and we got roughly $278 billion over five years,” Foxx explains. “There’s still some distance there. And that’s not easy to figure out because you have to determine how to pay for it,” he adds. “That’s the next big thing: a long-term answer to how you pay for transportation.”

THE ELUSIVE LONG-TERM FUNDING SOLUTION

Indeed, while the FAST Act secures funding for the duration of the five-year reauthorisation it does so through a hodge podge of sources such as budget transfers and offsets from the Federal Reserve’s surplus account, oil sales from the US Strategic Reserve and increased custom fees, according to Allen & Overy.

A solution to the funding problem has been put forth by US Representative John Delaney, a Maryland Democrat, who since 2013 through his Partnership to Build America Act and more recently his Infrastructure 2.0 Act has been advocating for international tax reform that would bring back some of the $2 trillion US corporations are estimated to have sitting overseas to fund infrastructure projects.

President Obama has supported the idea, including a proposal in his 2016 draft budget that would require US companies to pay taxes on their foreign earnings now, as opposed to deferring payment indefinitely. Under current law, corporations do not have to pay taxes on revenues generated abroad until and unless they repatriate those funds.

While bipartisan support for corporate tax reform has been growing steadily it has failed to reach the tipping point that would actually see it enacted into law. Why?
“Let’s face it, business tax reform is a hard nut to crack because first you have to determine the scope of it, then all sides have to agree,” Foxx acknowledges. “I still think there is an appetite on Capitol Hill to tackle business tax reform but I think it’s moving at a slower pace than the deadlines we’re facing in regards to the Highway Trust Fund (HTF). I don’t think the conversation is closed by any stretch of the imagination, I just think it’s been delayed a while,” he comments.

RESTARTING THE STALLED GATEWAY PROJECT

While having a multi-year transportation bill passed after 36 short-term extensions during his watch is a major coup, it is not the only highlight of Foxx’s two and a half years as head of USDOT.

Another major breakthrough came in November when the Port Authority of New York and New Jersey announced that New York, New Jersey and the federal government had agreed on a 50/50 funding framework for the project, a deal Foxx was personally involved in brokering.

“I’m tired of seeing America have these major projects that need to happen, that involve assets that people need to get to work, to get to school, or in some way to use for their livelihood,” he says. “To see these projects not happen, when we could be tackling them is something that bothers me. It just bothers me that our country has been stuck in neutral or probably in reverse for so long.”

It was part of this frustration that led Foxx to invite Andrew Cuomo and Chris Christie, governors of New York and New Jersey, to the table to discuss the Hudson River Tunnels project. The latter is critical not only for the two states – two new tunnels would replace the existing 105-year old tunnel that connects the two states – but for the Northeast region since it is a vital part of the 457-mile Northeast Corridor, owned and operated by Amtrak, the national passenger rail company.

The $20 billion project has been on hold for years primarily due to political bickering over who should pay for it.

“But I also spoke out about the Hudson River Tunnels project because it’s emblematic of what’s wrong with infrastructure in America more generally, which is there aren’t a lot of questions about what we need to do; there are a lot of questions about how we do it and how we pay for it,” he remarks.

‘RELENTLESS FOCUS’ ON EXECUTION

With significant goals having been achieved so far, the next question is inevitably ‘what’s next?’

“What we have to do going forward at this point is [to] really focus relentlessly on execution,” Foxx stresses.

“This bill creates an awful lot of work for this department,” he says, referring to the 1,300-page FAST Act. “It’s good work, but it’s work and so delivering on what this bill requires us to do – setting up this Bureau for example, developing an $800 million discretionary programme to help improve freight networks – we have lots to do. So the theme for 2016 is less idea generation and more execution.”

With infrastructure having such a multi-dimensional impact on society – be it job creation, economic growth, increased competitiveness, or a better quality of life – the question is which of these does Foxx consider to be the greatest motivator for him?
“I think it’s my kids,” he replies without pause. “What motivates me is the possibility that because of 36 short-term extensions, long-term uncertainty, the lack of a transportation vision, that we’ve started to recede on the promise of leaving our kids a better world than the one we found,” he elaborates.

“And so restoring that promise, building and expanding on what was given to us so that the next generation will have a better quality of life, an easier time getting around and a more sensible transportation system within which to work and grow and create jobs – that’s what I work for every day.”