21:00, May 31 294 0 law.com

2017-05-31 21:00:04
LaHood and Ballard Spahr's Park Debate Interstate Tolls, Infrastructure Spend
Left to right: Steve Park, Ballard Spahr and Ray Lahood,

Infrastructure policy seems to leave room for consensus, so we looked to long-time public servant Ray LaHood and public-private partnership guru Steve Park to explain the contours for The National Law Journal’s latest Regulatory Face Off.

LaHood served as the 16th U.S. Department of Transportation secretary. Before that, he was a Republican congressman from Illinois. He’s now a senior policy adviser at DLA Piper, splitting his time between Washington and Illinois.

And Park leads Ballard Spahr’s P3 and infrastructure group, working on deals that have attempted to privatize highways and that financed bridges, utility systems and housing developments. He is based in Philadelphia.

National Law Journal: What’s the biggest need you see right now in infrastructure and transportation policy?

Ray LaHood: The biggest issue for infrastructure is not knowing what to do. There’s 60,000 structurally deficient bridges in the country right now. There’s potholes all over America. The interstate’s falling apart. Transit systems that are 50 and 60 years old are in a state of disrepair. Amtrak needs money for new cars and new infrastructure. So the issue for infrastructure is not what the problems are. Everybody knows what they are. The biggest issue is finding a pot of money that will fund the fix-up or the repair or replacement.

Steve Park: To put it another way, deferred maintenance is the easiest thing for not only mayors and governors and county officials, but school officials and universities and people who look after buildings to cut if there are other budget issues. If you are a mayor and you need to pay your pension, the easiest thing for you to do is to just cut your maintenance budget because you think your building is going to stick around for however long. So what if the air conditioning doesn’t work, right?

NLJ: The president believes even the trucking industry would be behind raising the gas tax if it fixes the roads.

LaHood: It’s not only the trucking industry. For the last five or six years, you’ve had the Chamber of Commerce partnered with the AFL-CIO. You’ve got unions, you’ve got contractors, you’ve got labor people, you’ve got business people. Every group in America that knows anything about infrastructure knows that in order to fix up all of the crumbling infrastructure around America, you have to raise the gas tax.

Twenty states have raised their own gas tax because they’re not going to sit around and wait for the federal government to do nothing. That’s significant. In some of these states, they’re completely controlled by Republicans. This idea that Republicans are afraid to raise the gas tax is not accurate in the states.

NLJ: So is there bipartisan consensus on how to pay for infrastructure?

Park: To continue to raise gas taxes, that was pretty bipartisan. It’s just at a national level, it’s been a harder conversation to have.

[The other idea] I think is very interesting is the idea of tolling, especially tolling the existing interstates. We in Pennsylvania tried to toll I-80 at one point. That didn’t work. Others have tried. Tolling existing interstates would be really helpful, but there hasn’t been as much movement on that.

LaHood: Gov. [Ed] Rendell [former governor of Pennsylvania], frankly, made a strong case for [the Interstate 80 toll]. The reason we denied it was because the money was not going to be used exclusively for the tolling of Interstate 80. Gov. Rendell wanted to use part of the tolling to take care of deficit budgeting. We felt that really wasn’t fair to taxpayers.

One reason that politicians give for not being willing to raise the gas tax is, Will the money be then used for infrastructure? In some states, it’s used to pay state police salaries and do all kinds of other deficit spending. That’s a great source of irritation to people.

Park: In Pennsylvania, that money was going to be used for mass transit, and it wasn’t going to fly. I understand why it didn’t work.

NLJ: How might some of the regulatory changes on the horizon impact the issues you’ve worked on previously?

LaHood: What we did while we were at DOT was try and reduce the time it takes from the time that people get the green light to do a project and actually get the project implemented. We reduced projects from 10 years down to about four years. I think the Trump administration has talked in terms of reducing that time even further. The way you have to do that is you have to instruct the people within your administration. You can’t have things sitting on the desk.

Park: The area that the president has specifically focused on is the [Environmental Protection Agency]. All new projects have some kind of environmental effects assessment or approval from EPA, and oftentimes those processes take a long time. That’s one thing he’s certainly focused on basically by cutting in half the EPA.

The one danger you have in doing that is sometimes at the back end, you can run into issues. That said, as a deal lawyer, I’m all for deals going faster. It’s just it’s not always the best way.

NLJ: Are there other solutions in infrastructure and transportation you see in your practice that aren’t being captured in the political discussion?

Park: Public-private partnership speed throughs have been around and are being used right now to fund certain types of infrastructure. It’s an innovative tool. Many states have been using P3 as a tool in the toolbox — not the only tool, but a tool to create infrastructure funding. It’s not free money. You can’t use it as a panacea for all your problems. It’s a financing tool. It’s not a funding tool. It’s a way to get projects delivered quickly, not necessarily to pay for them.

LaHood: We’ve been promoting public-private partnerships and we funded a bunch of public-private partnerships. We funded a tolling project in Virginia. The Silver Line, the last leg of the Metro system in Washington, is a billion-dollar public-private partnership. The redo of LaGuardia [Airport in New York] is a public-private partnership.

The bottom line is this: If you want to get to a trillion dollars, there’s about five ways to do it. Raise the gas tax 10 cents a gallon and index it. That gets you about a billion dollars a year.

Public-private partnerships, there’s a lot of money that’s available now through investors waiting for projects. You can use VMTs, vehicle miles traveled. That’s being tried on an experimental basis where you tax people on the number of miles that they travel. President [Barack] Obama talked about an infrastructure bank. That’s $50 billion, but the Republicans would never go along with that.

You can’t do it with just one of these, but a combination of all of these together would get you some real money which is needed today for all of the crumbling infrastructure.

NLJ: Regarding the president’s foreign policy, he’s taken a hard line on trade. Is that something that could affect foreign investment in U.S. infrastructure?

Park: I don’t think so. There are plenty of foreign companies doing transportation work in the U.S. right now. Australians, Spanish, Canadian, French, British companies are heavily involved in infrastructure, not just transportation. If anything, I think they feel positive about what he is saying about trying to leverage private sector financing.

LaHood: DLA Piper is working with the Japanese on a $10 million investment that they’ve made in the Maglev project between Washington and New York. They haven’t backed away from it at all. As a matter of fact, when Prime Minister Abe met with Trump, he raised the issue with the president and not in a negative way. In a positive way. They’re letting him know that they’re willing to invest, and the Japanese are also investing in high speed rail in California.

NLJ: One of the very intensely debated political issues is the proposed wall on the U.S.-Mexico border. Is there discussion in the private sector related to financing the project?

Park: At the end of the day, if they wanted a private sector company to come in and bid on it, would they be able to find companies to do that? I’m sure they could. Would it be the cheapest way to do it? I don’t know. The U.S. government is not going to build it itself. Someone is going to build it for some kind of fee, whether or not they’re going to get private-sector financing to finance it. An asset is an asset. If it’s a billion-dollar project, people are going to come because they’re going to want to make money.

NLJ: Secretary LaHood, you’re now a member of Uber’s advisory board. That company has had a fair amount of friction with regulators. How do you see that resolving?

LaHood: We’ve given advice to the leadership of Uber when some of these controversial matters have been brought up. At our last advisory board meeting in January, we met personally with the CEO of Uber and he listened carefully. We had a rather lengthy discussion about some of the issues that Uber was facing. Then, as some of these other matters have come up, they’ve called us to ask our advice.

I think the team has listened, and frankly I think they’ve actually made some changes to try and enable them to do what they have to do to be successful, but also to make sure they’re doing things the right way.

NLJ: In a previous interview you said you flew a lot on United, and during your time as transportation secretary focused a great deal on making airlines more consumer friendly. Given what happened to that airline in the past month with the forceful removal of a passenger from a flight, are you still flying United regularly?

LaHood: I still have a home in Illinois, and when I fly to Illinois, I use United. I do a lot of traveling, so I use other airlines too. I appreciate it very much what the CEO of United [Oscar Munoz] did before the Transportation Committee. He apologized about six times to the passenger who was pulled off of the plane. They’ve reached the settlement with that passenger. I think Mr. Munoz recognizes that some very serious things were done and he’s put in place corrections of those. The message that he’s put out is that this isn’t going to happen again.

NLJ: Do you think that there will be infrastructure reform before Christmas?

LaHood: The answer is that the administration is working on putting together an infrastructure bill. I was at the White House yesterday. I met with Mr. D.J. Gribbin [the president’s infrastructure adviser], who has been assigned the task of putting a bill together that reflects the president’s priorities. I think they will have a bill. They’ll be talking a great deal about how to fund it, and I think that will be coming sooner rather than later.

Park: It’s hard to know. I would say [the answer] is probably yes.