[Congressional Record Volume 155, Number 60 (Thursday, April 23, 2009)]
[Senate]
[Pages S4688-S4689]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself and Mr. Grassley):
  S. 884. A bill to amend title 23, United States Code, to remove 
privatized highway miles as a factor in apportioning highway funding; 
to the Committee on Environment and Public Works.
  Mr. BINGAMAN. Mr. President, when our States and cities lease their 
tolled highways to private parties, American taxpayers almost always 
experience significant fee increases at the toll booth. But our 
taxpayers' contribution does not end there. Under current tax law, the 
Federal Treasury subsidizes private lessors through exceedingly 
generous depreciation and amortization deductions. Meanwhile, Federal 
funding continues to flow to the state government--as though the 
highway had never been privatized. Today, I rise to introduce two bills 
that would put an end to this fleecing of the American taxpayer. I am 
pleased that Senator Grassley, the Ranking Member of the Senate Finance 
Committee, is joining me in introducing both bills.
  I'd like to take a moment to set the stage, by explaining where we 
find ourselves. There is no denying the seriousness of our nation's 
surface transportation funding challenges. Among the solutions that 
have been offered are so-called Public-Private Partnerships, or PPPs. 
Under one PPP model, a state or local government leases existing 
highways to a private party, often on a very long-term basis. We have 
already seen two existing highways sold off to private companies. In 
2004, Chicago sold Macquarie of Australia concession rights to the 
Chicago Skyway for 99 years, in exchange for $1.8 billion. In 2006, 
Indiana sold concession rights to the Indiana Toll Road to a 
partnership between Cintra of Spain and Macquarie for 75 years, in 
exchange for $3.8 billion. Both deals have generated significant 
interest from the press and the financial community. Now, investors are 
approaching state and local governments across the country, seeking a 
piece of what is believed to be a very lucrative pie. For instance, 
last year Governor Ed Rendell proposed a $12.8 billion deal for a 75-
year sale of concession rights to the Pennsylvania Turnpike, which, if 
ratified, would represent the largest privatization of highway 
infrastructure in U.S. history.
  While I agree that States should have some latitude to determine how 
to operate their own highways, that doesn't mean that the Federal 
taxpayer should subsidize leasing these highways. But as we uncovered 
at a Finance Subcommittee on Energy, Natural Resources and 
Infrastructure hearing that I convened last year, the Federal 
government--and taxpayers in all states--now subsidizes these PPPs 
through exceedingly generous tax provisions. To take advantage of the 
Tax Code's 15-year cost recovery period for highway infrastructure, a 
private lessor must obtain constructive ownership of the road. 
Constructive ownership is generally attained by entering a lease that 
exceeds the 45-year period that the Bureau of Economic Affairs, BEA, 
says is a road's ``useful life.'' Once they attain this constructive 
ownership, the private lessor can recover most of its costs over the 
first 15 years of the lease--or one-third as long as BEA says the 
highway infrastructure can be expected to last. The end result? Private 
operators demand exceptionally long lease lengths, to ensure they can 
take advantage of the Tax Code's subsidy.
  These Tax Code provisions are of interest not just because the Senate 
must prudently shepherd our Nation's tax revenues, but also because 
there are considerable transportation policy dangers to these very 
long-term leases. Chicago signed a 99-year lease for the Skyway, a road 
that, at the time of the lease, had only a 47 operating history. 
Indiana signed a 75-year lease for its Toll Road, a highway that, at 
the time of the lease, had only a 49 history. With respect to a 
critical artery of transportation, how can a State or city possibly 
predict its future needs for a period that is twice that artery's 
operating history? It is impossible to envision how transportation will 
change in the next hundred years. As a point of reference, the Model T 
is 101 years old--can we even pretend to imagine what the next century 
will bring? These very long lease lengths are all the more troubling 
because these deals often contain non-compete clauses, which make it 
difficult for public transportation agencies to address safety and 
congestion problems on highways and adjacent streets.
  It is true that private lessors are merely following the letter of 
the law. But when cost-recovery rules subsidize forms of investment 
that contravene the public interest, Congress should change those 
rules. Indeed, public policy concerns have already led Congress to 
alter cost-recovery rules for other assets, such as luxury cars, sport 
utility vehicles, and sports franchises.
  Senator Grassley and I agree that to protect the American taxpayer, 
such an alteration is also necessary here. It's time for the tax tail 
to stop wagging the dog, by cutting off Federal tax subsidies to 
companies that privatize existing American highways. Our first bill, 
the Transportation Access for All Americans Act, would do just that. It 
would allow a private operator of an existing highway to depreciate 
costs associated with tangible highway infrastructure on a 45-year 
period, in line with Bureau of Economic Analysis estimates, and to 
amortize the intangible right to collect tolls on a schedule that is no 
shorter than the lease's actual length. By making these changes to the 
Tax Code, our bill eliminates the unjustifiable subsidy that the U.S. 
taxpayer is now asked to provide directly to the private operators.
  Our second bill, S. 885, the Transportation Equity for All Americans 
Act, deals with the highway funding that is provided for a privatized 
road. As I understand it, when a road is privatized, all responsibility 
for maintaining the road, collecting tolls, paying the investors' 
profit, and so forth are taken on by the private entity. It simply 
makes no sense that the road should continue to qualify for highway 
funding if the road is privately operated. Similarly, it makes no sense 
that the formulae that distribute the Federal highway funding should 
reflect any credit for privatized roads--it would be like the users 
paying twice, once at the toll booth and again in the taxes they 
already pay to use the Nation's highways.
  Under current law, all roads, including interstate highways, national 
highways, and other major state and local roads in the federal-aid 
system are included in the calculation of the federal highway funds. 
The lane-miles and vehicle-miles-traveled on all these roads are used 
directly to apportion the federal highway funds for the Interstate 
Maintenance Program, the National Highway Program, and the Surface 
Transportation Program. The calculation currently includes roads that 
are publicly or privately operated. Our second bill is very simple; it 
subtracts from these calculations the lane-miles and vehicle-miles-
traveled for any privatized highway, thus eliminating the double 
payments. The bill also corrects the Equity Bonus program to reflect 
properly the changes in the formula calculations.
  This year Congress must reauthorize the Federal surface 
transportation programs. I look forward to working with Finance 
Chairman Baucus and Senator Grassley and EPW Chairman Boxer and Senator 
Inhofe to complete a new transportation bill that meets the needs of my 
State and the Nation.
  Mr. President, I ask unanimous consent that the text of the bill and 
a bill summary be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 884

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Transportation Equity for 
     All Americans Act''.

     SEC. 2. REMOVAL OF PRIVATIZED HIGHWAY MILES.

       (a) In General.--Section 104(b) of title 23, United States 
     Code, is amended by adding at the end the following:
       ``(6) Privatized highway miles.--
       ``(A) Definition of privatized highway.--In this paragraph, 
     the term `privatized highway' means a highway subject to an 
     agreement giving a private entity--
       ``(i) control over the operation of the highway; and
       ``(ii) ownership over the toll revenues collected from the 
     operation of the highway.
       ``(B) Exclusion.--For the purposes of paragraphs (1), (3), 
     and (4), the lane miles and vehicle miles traveled on a 
     privatized highway

[[Page S4689]]

     that is otherwise an included highway shall be excluded from 
     consideration as factors in the formula for apportionment of 
     funds under this title.''.
       (b) Equity Bonus.--Section 105 of title 23, United States 
     Code, is amended by adding at the end the following:
       ``(g) Privatized Highways.--Calculations under this section 
     shall be made without taking into account the exclusion under 
     section 104(b)(6) of certain lane miles and vehicle miles 
     traveled from consideration as factors in the formula for 
     apportionment of funds pursuant to this title.''.
                                  ____


       Bill Summary--Transportation Access for All Americans Act

       The Internal Revenue Code generally characterizes a lease 
     of assets as an outright purchase of those assets if the 
     lessee has acquired all the benefits and burdens of ownership 
     for a term that significantly exceeds their expected 
     remaining useful life (as generally determined by the Bureau 
     of Economic Analysis). The Bureau of Economic Analysis 
     estimates the service life of highways and streets to be 45 
     years. For Federal income tax purposes, a lessor with such 
     constructive ownership is allowed to recover its costs 
     through depreciation and amortization deductions. 
     Notwithstanding BEA's 45-year estimate, the Tax Code 
     currently permits the value of the lease of tangible 
     infrastructure to be depreciated on a 15-year schedule, on a 
     150% declining-balance basis. The intangible franchise right 
     to collect tolls is currently recovered over a 15-year 
     period, regardless of the lease length. The Act would amend 
     Section 168(g)(2) of the Internal Revenue Code so that a 
     taxpayer that leases an existing highway on a sufficiently 
     longterm basis can depreciate the tangible infrastructure on 
     a 45-year schedule, on a straight-line basis. The Act would 
     also amend Section 197(f) of the Internal Revenue Code so 
     that the lessor of an existing highway can amortize the 
     intangible franchise right to collect tolls over the greater 
     of a 15-year period or the actual length of the lease.
                                  ____


       Bill Summary--Transportation Equity for All Americans Act

       The bill would amend sections 104(b) and 105 of title 23, 
     USC, pertaining to Federal-aid highways apportionment factors 
     and the equity bonus program. Section 104(b) provides the 
     manner in which the Secretary apportions the sums authorized 
     to be appropriated for expenditure on the Interstate and 
     National Highway System program, the Congestion Mitigation 
     and Air Quality Improvement program, the highway safety 
     improvement program, and the Surface Transportation program 
     for that fiscal year, among the several States. The amendment 
     to section 104(b) would remove lane miles and vehicle miles 
     traveled on a ``privatized highway'' from the formula factors 
     for the National Highway System, the Surface Transportation 
     program, and the Interstate Maintenance component.
       Section 105, the equity bonus program, provides that the 
     Secretary allocate among the States amounts sufficient to 
     ensure that no State receives a percentage of the total 
     apportionments for the fiscal year for specific programs that 
     is less than the calculated State percentage. The amendment 
     to section 105 would provide that, notwithstanding section 
     104(b)(6), lane miles and vehicle miles traveled on a 
     ``privatized highway'' are not excluded from the calculations 
     under this section.
                                 ______