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Great Lakes St. Lawrence Seaway Development Corporation (GLS);

Maritime Administration (MARAD);

Federal Motor Carrier Safety Administration (FMCSA); and

Pipeline Safety and Hazardous Material Administration (PHMSA).

DOT’s fundamental problem is that instead of being able to focus on providing Americans with affordable and abundant transportation, it has become saddled with congressional requirements that reduce the department to a de facto grantmaking organization. Yet there is little need for much of this grantmaking, for two reasons:

• New technology enables private companies to charge for transportation in many areas, which could transform how innovation is financed. It is vital to consider the role of user fees and other pricing innovations with regard to transportation infrastructure. Airport landing fees for aircraft, toll charges on roads and bridges, and per-gallon taxes on gasoline and diesel fuel are all examples of user charges that affect the decisions of transportation system users. These changes could shift our nation’s transportation away from being a top-down system that is misaligned with the needs of so many Americans. Increasing private-sector financing could revolutionize travel and increase everyday mobility to its greatest potential in a way that Americans prefer. Doing so would keep transportation decisions out of the hands of bureaucrats in Washington, D.C., who are far removed from local problems and preferences.

• Iffunding must be federal, it would be more efficient for the U.S. Congress to send transportation grants to each of the 50 states and allow each state to purchase the transportation services that it thinks are best. Such an approach would enable states to prioritize different types of transportation according to the needs of their citizens. States that rely more on automotive transportation, for example, could use their funding to meet those needs.

Meanwhile, many Americans continue to confront serious challenges with their day-to-day transportation, including costs that have increased dramatically in recent years. DOT in its current form is insufficiently equipped to address those problems. DOT’s discretionary grant-making processes should be abolished, and funding should be focused on formulaic distributions to the states, which know best their transportation needs and are incentivized to think of the

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long-term maintenance costs. At a bare minimum, the number of grants should be consolidated.

DOT would also reduce unnecessary burdens by returning to the Trump Administration’s “rule on rules” approach to regulations, implemented in late 2019 as RIN 2105-AE84.* This rule strengthened the Administration’s effort to remove outdated regulations, find cost-saving reforms, and clarify that guidance documents are in fact guidance rather than mandatory impositions. The Biden Administration unwisely moved away from this reform, and the next Administration should revive

it without delay.

BUILD AMERICA BUREAU

The Build America Bureau (BAB) resides within the Office of the Secretary and describes itself as “responsible for driving transportation infrastructure development projects in the United States.”® This lofty-sounding goal in practice means that the Bureau serves as the point of contact for distributing funds for transportation projects in the form of subsidized 30-year loans. For higher-quality projects and in certain circumstances, these government loans may disintermediate the private sector from providing similar financing, albeit at higher costs.

At certain times in the economic cycle, and for many lower-quality projects with more dubious economic return, similar loans from the private sector are simply not available. Should the BAB continue to exist and potentially disintermediate the private financing sector, it must maintain underwriting discipline and continue best practices of requiring rigorous financial modeling and cushion for repayment of loans in a variety of economic scenarios. In addition:

• The BAB should ensure that these loans do not become grants in another form by maintaining the requirement that all project borrowers be rated at least investment grade by the major ratings agencies and that project sponsors remain liable to ensure that all financing is repaid, even in periods of financial stress and economic downturns.

• Project sponsors should be required to show that projects have positive economic value to taxpayers, and sponsors should guarantee that all federal financing will be repaid through properly structured loan terms, including a minimum equity commitment from all project sponsors.

• All projects should also be required to show repayment ability in various interest rate environments, and the BAB should ensure that long-term loans are structured appropriately with regard to the fixing of interest rates and hedging of interest rate risk on the part of the borrowers to avoid financial stress or default driven solely by rising interest rates.