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4 Funding OptiOns t he fundamental question posed in the committee’s statement of task concerns the responsibility of the Department of Defense (DoD) to pay for off-base transportation impacts. The first section of this chapter reviews existing DoD programs for assisting communities whose trans- portation facilities are affected by military base growth. The second sec- tion reviews traditional non-DoD government programs to fund surface transportation infrastructure. These programs include those administered by the U.S. Department of Transportation (USDOT), for which national defense is an eligibility criterion. State and local government transpor- tation sources are also reviewed in this section, including how local governments normally work with private developers who propose major projects that will affect the localities’ transportation networks. Alterna- tives to construction funding for capital improvement to increase infra- structure capacity, such as operations and maintenance (O&M) funding for ongoing congestion management, are also discussed. The committee is also charged with assessing current federal programs that could be of assistance in BRAC cases. The committee’s treatment of traditional federal, state, and local programs for funding transportation is influenced by the current fiscal context. In the aftermath of the “Great Recession,” governments are under the most demanding fiscal pressure experienced in recent decades and face a public unsympa- thetic to tax increases to fund transportation. Even as the military budget has grown dramatically to wage wars in Iraq and Afghanistan, govern- ments have seen their revenues decline because of the recent recession, particularly tax revenues they typically rely on for transportation. department OF deFense prOgrams The official policy of DoD is that, with limited exceptions, the impact of bases on local government infrastructure is the responsibility of those governments (DoD 2008) (see also Box 1). The principal argument is that DoD employees pay taxes into the state and local coffers that fund infra- structure, and those sources should be tapped for making improvements to meet the demands placed on the infrastructure by soldiers and DoD civil- ian employees. DoD policy, however, also allows for special circumstances in which DoD provides funds for transportation improvements. 55

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases BOx 1 Policy Basis for Defense Access Roads criteria (Quotation from DoD, Defense Access Road Criteria, October 2008) It is the responsibility of state and local highway agencies to provide and maintain adequate highways to serve public needs. These needs include those of DoD. The needs of defense were one of the original justifications for the Federal-Aid Highway Program that includes the Dwight D. Eisenhower National System of Interstate and Defense Highways. Defense traffic generates the same road-user revenues for state roadways as does other traffic. Therefore, DoD expects state and local highway authorities to develop and maintain adequate highways to serve defense installa- tions just as they do for other traffic generators. It is DoD policy to not provide funds for the maintenance of non-DoD roads (except for maintaining the structural section of county gravel roads that support the Department of the Air Force’s Intercontinental Ballistic Missile Sites). DoD recognizes that situations occur where defense traffic places an unexpected burden on state and local highway programs. These situations may include a dynamic increase in mission-related activities that result in a significant and sudden increase in defense traffic. The DAR program may then be able to be used to help fund highway improvements necessary to accommodate the sudden and unusual defense impacts. Defense Access RoADs PRogRAm Under the Defense Access Roads (DAR) program, administered by the military Surface Deployment and Distribution Command (SDDC), DoD may pay for public highway improvements to address the impact on traffic of sudden or unusual defense-related actions (see Box 2). DAR enables DoD to help pay indirectly for improvements to highways DoD designates as important to the national defense. Under DAR, DoD can use funds provided in military construction (MILCON) appropria- tions to pay for all or part of the cost of constructing and maintaining roads designated as “defense access roads.” 56

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Funding OptiOns BOx 2 statutory Basis for Defense Access Roads criteria (Quotation from DoD, Defense Access Road Criteria, October 2008) The DAR program has its basis in and is authorized by Title 23, U.S.C., “Highways,” Section 210: 23 U.S.C. 210a The Secretary [of Transportation] is authorized, out of funds appropriated for defense access roads, to provide for the construction and maintenance of defense access roads (includ- ing bridges, tubes, and tunnels thereon) to military reservations, to defense industries and defense industry sites, and to the sources of raw materials when such roads are certified to the Secretary by the Secretary of Defense or such other official as the President may designate, and for replacing existing highways and highway connections that are shut off from the general public use by neces- sary closures or restrictions at military reservations and defense industry sites. The DAR program began decades ago when many bases were located, or being located, in relatively undeveloped regions. The pro- gram appears to have been designed to pay for access roads used princi- pally by the military or to improve roads that would be harmed by heavy military equipment. The program has funded road projects that access missile installations and other military facilities that were off the federal- aid primary highway system. These facilities were generally in isolated areas and not served by access roads. Funds appropriated for DAR projects are transferred from DoD to FHWA to administer. The provisions of U.S. Federal Code, Title 23, which includes requirements of federal laws applying to federal-aid highways, apply to all DAR projects. Allocations are project specific; therefore, underruns cannot be used on other projects and unused DAR funds may be reallocated by the Washington Headquarters office of FHWA or returned to the military. Funds must be obligated within 5 years of approval. Unobligated balances lapse after the period of availability. Unexpended funds are canceled 10 years after the last year of obligation. 57

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases As federal transportation programs go, the DAR program is quite modest. From 2001 to 2010, it certified as eligible 19 projects, 15 of which have been funded. Since 2005, the program has provided about $22.5 million annually for transportation improvements, including proj- ects that are not BRAC related. By way of comparison, federal aid for highway transportation funded through USDOT exceeded $30 billion annually from 2006 to 2010. Eligibility Criteria Projects are eligible for DAR funding if they meet one of the following criteria (GAO 2009): 1. The installation needs a new access road to accommodate a defense action. 2. A defense action causes traffic to double. 3. The installation needs a new or improved access road to accommodate a temporary surge in traffic to or from the installation due to a defense action. 4. The installation needs a new or improved access road to accommodate special military vehicles such as heavy equipment transport vehicles. 5. The installation needs a road to replace one closed because of military necessity. Criterion 2 is of most concern in metropolitan areas. Unlike the rural and less developed areas for which the DAR program was designed, bases in metropolitan areas already have access roads, so Criterion 1 is not likely to come into play; nor is Criterion 3, because an expanded access road for a temporary surge would be impractical to try to implement in a metropolitan area given the difficulty of adding capacity on short notice. Criterion 4 was intended to improve formerly rural, often unpaved roads, to handle heavy vehicles. Criterion 5 comes into play only in the rare instance when a road must be closed (the DAR program funded such a project at Fort Belvoir North). Criterion 2 is most problematic because, in congested metropolitan areas, a doubling of traffic is extremely unlikely to occur because of a BRAC action. Many of the highways surrounding the bases reviewed in Chapter 2 carry such high levels of traffic that it would not be possible for traffic to double because of the nonlinear impact that additional traffic has in congested conditions (Figure 9). As shown in Figure 9, the impact of additional traffic on congested highways is not linear. Travel speeds fall off dramatically at high volumes 58

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Funding OptiOns Figure 9 generalized relationships among speed, density, and flow rate. (SOURCE: Highway Capacity Manual 2010, Exhibit 4-3.) when new traffic is added. With these congestion levels in place, a traffic increase of only 5% or 10% could cause a highway facility to transition from relatively free-flow conditions to stop-and-go conditions, thereby limiting the maximum number of users. Adding several thousand new commuters to the few highways serving these bases during the peak period could have this effect. In some cases reviewed in Chapter 2, major high- ways are operating at low-speed conditions, and adding several thousand users during peak hours on these facilities could result in near gridlock. Thus, it appears that the doubling criterion is not appropriate for deter- mining DAR eligibility for funding transportation improvements in congested metropolitan areas. When considering travel demand management programs to relieve congestion, the nonlinearity of a few vehicles having a disproportionate effect can work in reverse. A small reduction in urban peak traffic vol- ume can result in a proportionally larger reduction in delay. For example, a 5% reduction in traffic volumes on a congested highway (e.g., from 2,000 to 1,900 vehicles per hour) may cause a 10% to 30% increase in average vehicle speeds (e.g., increasing traffic speeds from 35 to 45 mph). As a result, even relatively small changes in traffic volume or capacity on congested roads can provide relatively large reductions in traffic delay. The timing, location, and type of travel changes will have different effects on reducing congestion. 59

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases DoD-Funded Study of DAR Criteria In 2010, DoD undertook a study of the DAR criteria. DoD requested that SDDC undertake this study to evaluate the merits of safety as a potential criterion. SDDC identified that safety and congestion should be inves- tigated as a potential criterion. The study, which was never released, reported the following: According to the Institute of Transportation Engineers, traffic access and impact studies are conducted to assess the transportation impacts of proposed developments and other land use changes. This may include new facilities or changes in land use resulting from the redevelopment of an existing area. When considering installation growth related to mission change, BRAC, or other factors, ultimately the traffic impacts experienced are a result of the activity associated with new or modified facilities. In that way installation impacts are almost identical in nature to that of the construction of a new office building or shopping center by a land developer. Therefore, it makes sense to use the same policies and procedures in identifying the transportation impacts of a military installation that apply to land development. (Gannett Fleming 2010) The recommended approach in the Gannett Fleming report for DoD would consider the following factors to determine eligibility of projects in highly urbanized areas where military growth causes sudden or unusual traffic impacts: • Military installation is within an urbanized area with population greater than 200,000. • Proposed project area must be within a mile of the military facil- ity perimeter. • Proposed project area has a minimum increase of 100 peak-hour DoD trips. • Project area must operate below level-of-service D after the mili- tary impact. Upon determination that a project is eligible for DAR funding, a DoD- share analysis would be conducted to identify the installation’s potential contribution to the roadway improvements necessary to maintain accept- able or current operating conditions. The recommended project will, at a minimum, restore the level of service or delay time to levels which existed prior to the military 60

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Funding OptiOns action. For all DAR projects, SDDC conducts an analysis to deter- mine the fair-share that should be funded by DoD. This analysis considers the military impact to traffic on the subject roadway seg- ment and mitigation required to address the impact. The appropriate military funding share is then determined based on the instal- lation’s proportion of the total traffic which utilizes the subject roadway segment. For large, complex projects involving military and non-military impacts, other factors (such as overall project scope, total project cost, and funding available from other sources) are taken into consideration. A similar fair-share analysis shall be conducted for projects found eligible for DAR funding using the criteria recommended in this study. (Gannett Fleming 2010) There are limitations to the share approach recommended in the Gannett Fleming study. First, calculation of the military’s impact on con- gestion using the impact fee model should not be based merely on the military’s share of total traffic. Impact fees charged to new developments assess costs on new development if the new use causes an infrastructure’s level of service to fall below an established standard. Moreover, the additional military traffic load could have a disproportionate effect on traffic flow as illustrated in Figure 9. Therefore, it makes more sense for the military share to be based on the increased delay caused by additional military traffic (the increased traffic may not all be attributed to the military, as many routes are experiencing traffic growth over time from all sources). Second, the impact of military traffic could affect traffic flow well beyond the arbitrary 1-mi limit. Metropolitan areas have fairly dense, interconnected networks of roads and highways. The source of congestion is not necessarily at the location of the traffic generator; it may be located at a bottleneck miles away or it may affect congestion on a major access route for miles beyond the 1-mi perimeter. DAR Eligibility for Nonhighway Transportation Improvements Most BRAC bases that were studied have adopted a multimodal approach in the development of their traffic management plans. They recognize the need to limit single-occupancy vehicle traffic onto bases and provide travel alternatives for base personnel. According to presentations made to the committee, they are motivated by the need to meet air-quality stan- dards, reduce their carbon footprints, and minimize energy usage (Presi- dent Obama 2009). Included in many base traffic management plans are strategies to improve bus transit; provide shuttles to rail and commuter rail stations; increase use of bus pools, carpools, and vanpools; expand 61

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases the use of telework, variable work hours, and schedules; and other travel management measures. Many bases are working with surrounding juris- dictions and service providers to carry out these plans. However, limited funds are available for these purposes. By statute, DAR can fund only road improvements. DAR limitations illustrate the need for other funding sources in addition to MILCON, such as O&M or other accounts over which commanders have some discretion, to be identified and used for multimodal and ongoing congestion management and improved access programs. Competition for MILCON Funds The DAR program funds projects relatively infrequently (15 projects over the last 10 years) in part because of the strict criteria used to approve projects and in part because of competition for funds with other MILCON projects. If a project is approved, funding is not guaranteed; projects must compete through the normal DoD MILCON appropriations process. In that context, the DAR project must compete with every other MILCON project being considered by DoD. Even before entering the competition, a DAR project must be sup- ported by the garrison commander. Bases preparing for a large influx of personnel have myriad needs for MILCON funds for essential items such as barracks, training facilities, and on-base infrastructure. The individual responsible for public works at Joint Base Lewis–McChord explained to the committee that improving off-base access was a low priority for the base commander compared with these more immediate needs (see Chapter 2). office of economic ADjustment The Office of Economic Adjustment (OEA) is DoD’s primary source for assisting communities that are adversely affected by DoD program changes, including base closures and realignments, base expansions, and contract and program cancelations. OEA offers technical and financial assistance to adversely affected communities and coordinates the involve- ment of other federal agencies through the Defense Economic Adjust- ment Program and the President’s Economic Adjustment Committee. Economic adjustment assistance provides a community-based con- text for assessing economic hardships caused by DoD program changes by identifying and evaluating alternative courses of action, identifying resource requirements, and assisting in the preparation of an adjustment strategy or action plan to help communities help themselves. 62

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Funding OptiOns OEA has funded studies, such as traffic studies, which help states and local communities define the impact of military growth on trans- portation. In BRAC 2005, for example, OEA provided transportation- planning grants to Maryland and Virginia. According to local officials, OEA also funded transportation studies for communities near several of the bases the Government Accountability Office visited in its assessment, including those near Eglin Air Force Base, Florida, and Fort Knox, Ken- tucky (GAO 2009). These studies can provide communities with more detailed, precise information about the transportation impact of military growth than the initial environmental studies performed by DoD. The funds used in these studies cannot be used to build infrastructure. OEA has funded local coordinator positions to assist in coordinat- ing local activities responding to BRAC, including transportation-related activities. For example, Harford County, Maryland, established a BRAC planning commission for Aberdeen Proving Ground. This commission, with OEA funding, helped establish the Chesapeake Science and Security Corridor Consortium, which includes eight jurisdictions in Delaware, Maryland, and Pennsylvania. With Harford County as the lead agency, the Chesapeake Science and Security Corridor Regional BRAC Office administers grants and coordinates regional BRAC responses. OEA’s efforts occur after DoD has decided to make changes to military bases. Its function is to help communities cope with military decisions that have already been made. tRAnsit Benefit PRogRAm Executive Order 13150 created the transit benefit program. The provi- sion of these incentives is authorized by the Federal Employees Clean Air Incentives Act of 1993. This program is designed to improve air quality, reduce traffic congestion, and conserve energy by encouraging employ- ees to commute to work on a daily basis by means other than single- occupancy motor vehicles. This program provides a financial incentive to federal employees in the National Capital Region in the form of a subsidy for using transit services or qualified vanpools (Kepplinger 2008). DoD launched its transit benefit program with an effective date of October 1, 2000. Personnel eligible to receive transit benefits must be a civilian, military, or nonappropriated fund employee paid and employed by DoD and permanently stationed and working in the National Capital Region. The Army established a policy implementing 5 U.S.C. 7905, which permits agency heads to reimburse federal employees, including members of a uniformed service, for certain commuting expenses. The policy allows army bases outside the National Capital Region to provide transit benefit 63

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases payments. Funds for the transit benefit program are included in the budget of the individual DoD commands or their components (Chu 2008). Under this program, participating employees receive, in addition to their current compensation, transit passes in amounts equal to their per- sonal commuting costs, not to exceed $230/month. Parking costs are not used in establishing commuter costs. This benefit applies to both mass transit and qualified vanpool participants. Employees with subsidized parking must relinquish their parking permits to receive the transit pass. AmeRicAn RecoveRy AnD Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 (ARRA) was passed by Congress and signed into law by President Obama on Febru- ary 17, 2009. The purpose of the $787 billion recovery package was to jump-start the economy to create and save jobs. The Act specifies appro- priations for a wide range of federal programs. Twenty-eight agencies, including DoD, were allocated a portion of the $787 billion in recovery funds. Each agency develops specific plans for how it will spend its ARRA funds. The agencies then award grants and contracts to state govern- ments or directly to contractors or other organizations. Some of these funds were used to expand the Fairfax County Parkway near Fort Belvoir. enhAnceD use LeAses Title 10 U.S.C. Section 2667 allows military installations to lease land and facilities to a private or public entity (http://www.ftmeade.army.mil/ pages/eul/eul.html 2010). Specifically, installations can, among other things, accomplish the following: 1. Grant the use of land and facilities for mission-oriented functions. 2. Enter into long-term or short-term leases, providing greater flexibility for facility reuse. 3. Receive no less than fair market rental, in cash or in-kind, as consideration for the leased property. The process supplements underfunded and unfunded capital improvements and operations and maintenance expenses. By statute, the lease must promote the national defense or be in the public interest. The property must not be excess to military department needs as defined by 40 U.S.C. 102 and determined to be available. This DoD leasing program 64

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Funding OptiOns allows a multiyear lease of installation property for commercial use in exchange for cash or in-kind services to the installation. Limited DoD maintenance funding and recent changes to the program have made it a popular tool for installations to address maintenance needs. Importantly, the revenues earned from enhanced use leases (EULs) remain under the control of the garrison commander rather than being returned to the DoD. This program essentially allows installations to become developers; however, there is no requirement that these commercial projects follow local and state processes to mitigate for impacts. In some cases, such as Fort Meade, the growth from EUL activities may exceed the BRAC-related growth and create more demand on access roads around the base than the BRAC movements. Communities sometimes oppose EULs because the program also potentially captures contracting activities that would follow the BRAC consolidations but would have been located outside the gate, where they would be taxable and would have to follow state and local processes. Nevertheless, the EUL process provides an opportunity for military bases that have developable excess land to raise revenues that could be used to improve transportation access services to that base. Because of base commanders’ many competing demands, however, these funds would need to be dedicated to transportation uses if revenues from EULs were to relieve the traffic impacts of bases. BAse oPeRAting AnD mAintenAnce Accounts Military construction funding is only one source to address traffic con- gestion caused by base activities. Capital expenditure programs, such as DAR, can provide site-specific traffic fixes but are not sufficient alone to address ongoing, variable, fluid, and non-site-specific impacts of traffic congestion. For example, transient base activities can temporarily over- load existing road capacities, but planning for such peaks through capital improvements may be unduly expensive, resulting in underutilized capacity if a peak is a one-time effect. Further, defining the contracting requirement for a military construction project may be difficult if the capital expenditure is off base, may benefit others besides the military, and may depend on complementary funding from nonmilitary sources, such as state and local transportation agencies, and regulatory approvals from nonmilitary entities, such as local planning agencies. Use of noncapital funding, such as O&M accounts or employee compensation accounts, may provide more flexible funding to meet variable traffic management needs. O&M funding, for example, could be made available to pay for dedicated bus service, commuter assistance 65

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases These grants are awarded on a competitive basis for capital investments in surface transportation projects. The projects must have a significant impact on the nation, a region, or a metropolitan area—and they must create jobs. TIGER II applicants must contribute at least 20% of a project’s cost. (No nonfederal matching funds were required in the first TIGER round, although ARRA gave priority to projects for which the federal money would “complete an overall financial package.”) These project proposals will undergo an evaluation of expected project costs and benefits: USDOT believes that benefit–cost analysis is an important discipline for surface transportation investment, and applicants are gen- erally required to identify, quantify, and compare the project’s expected benefits and costs. In the selection of projects in the first and second TIGER rounds, no base access projects for BRAC bases were selected for funding. This is perhaps explained by the requirement that projects be “shovel ready,” which means that they have cleared NEPA review, acquired right-of-way, and met other federal eligibility requirements. Nevertheless, in future rounds of TIGER grants, base access projects may be selected. The TIGER grant program has considerably more demand than it can accommodate. In the first round of TIGER grants, USDOT received applications for 32 times the available funds. Nearly 1,000 transporta- tion grant applications were submitted for more than $19 billion worth of projects, far exceeding the $600 million available from the program (USDOT 2010). Environmental Streamlining The development of transportation projects depends as much on meeting state and federal environmental requirements as it does on funding. The Safe, Accountable, Flexible Efficient, Transportation Equity Act of 2005 includes a number of provisions designed to expedite the environmental review of transportation projects mandated by NEPA.1 These provisions are designed to improve interagency communication and analysis in order to meet NEPA requirements in a more timely way than they have been met in the past. Executive Order 13274 (September 18, 2002), among other things, empowered the Secretary of Transportation to iden- tify high-priority projects that deserve special attention by resource agen- cies required to conduct NEPA reviews and analyses in order to expedite their review. Streamlining does not bypass NEPA or other federal require- ments; instead, it attempts to resolve complex interagency reviews and http://www.environment.fhwa.dot.gov/strmlng/es2safetealu.asp. Accessed Jan. 12, 2011. 1 70

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Funding OptiOns enhance communication so that determinations can be made regard- ing compliance with NEPA and other requirements. FHWA maintains a website with extensive information about environmental stewardship and streamlining, including case examples, guidance, and performance reports.2 stAte AnD LocAL goveRnments Along with funding some capital improvements, state and local govern- ments fund transportation infrastructure operational and maintenance expenses, which account for most transportation spending. From a state and local finance perspective, the BRAC 2005 round could hardly have come at a more difficult time. The year-over-year growth rate in state tax revenues began to slow in late 2005, well before the recent recession, but then went sharply negative in late 2008 (Rockefeller Institute of Govern- ment 2010, Figure 2). Although state revenues have begun to rebound, 2010 revenues are forecast to be 14.9% lower in 2010 than in 2008. Federal aid through USDOT programs discussed above almost exclu- sively fund capital improvements. Most states have a highway trust fund that is funded through motor fuels and other user fees, while local govern- ments rely on a wide variety of taxes to support their transportation assets, particularly property and sales taxes. The states rely on their trust funds for both highway capital and operating expenses. The sales tax on motor fuels provides an index of motor fuel tax revenues; the year-over-year growth rate in this tax went negative in 2006 and has remained so in 15 of the last 16 quarters (Rockefeller Institute of Government 2010, Table 5), which caused many states to suspend or cancel proposed capital spending. Local property taxes have been less severely affected by the economic downturn in the near term because they depend on reevaluations that lag swings in market values. Many jurisdictions will experience less revenue from this source over the next 3 to 5 years as jurisdictions reevaluate. Sales taxes, which many jurisdictions use to support transit, are still well below 2008 levels (Rockefeller Institute of Government 2010, Figure 3.) State and local agencies, particularly in the current economy, are experiencing demand for available transportation funds that far exceeds supply. Trends affecting the federal trust fund are also affecting sources of state and local transportation funds. In addition, many states are fac- ing large budget deficits, which have forced state and local agencies to reprioritize their transportation projects and eliminate many of them (AASHTO 2010, NCSL 2010, Ybarra 2008). http://www.environment.fhwa.dot.gov/strmlng/index.asp#history. 2 71

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases stAte infRAstRuctuRe BAnks Many of the states with BRAC actions have state infrastructure banks that could be a source of upfront capital to improve transportation facilities at low or no interest if a revenue source could be found to repay the loan. In the case of Fort Bliss, the state is dedicating a share of future federal surface transportation revenues to pay a developer who financed the project. Another possibility is for a local jurisdiction or state to dedicate some portion of existing tax revenues, or raise taxes, to repay a loan from a state infrastructure bank. Some complexities with this approach are obvious. Most of the facilities adversely affected by base expansion are state highways, and local property or business taxes would not apply. The state could dedicate a share of future highway user taxes to repay the loan, but, as indicated above, most state transportation trust funds are inadequate to meet current needs. Given the current status of state and local finances, the concept of diverting existing tax revenues to a new purpose, or raising taxes, would be politically unpopular, but such an approach might be possible in the future for some projects. imPAct fees The situation of a sharp increase in base personnel being transferred to new or expanded facilities is analogous to an unanticipated new, large private development occurring within a metropolitan region. Typically, regional leaders would negotiate with the developer and require that certain conditions be met to ameliorate the negative impacts of the development, and they often impose fees to offset capital improvement needs as a result of the development. If developers in such instances are unwilling to pay the impact fees, local governments can refuse to allow the development. Exactions, the on-site construction of public facilities or dedication of land, have been used for decades.3 Impact fees, a form of exaction, were instituted in the 1920s as a local financing tool. Where no appro- priate land was available for a traditional exaction, off-site land or a fee- in-lieu could be substituted for a dedication. Over time, these fees came to include capital costs for on- and off-site improvements brought about by new development. Rooted in the idea that new development should pay its own way, impact fees increasingly have been used to pay for improvements traditionally paid for by property taxes. According to the California State Controller’s Office, fees and service charges account for See Appendix A, from which this chapter is derived, for a more extended discussion of impact fees. 3 72

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Funding OptiOns almost 20% of annual local government revenues. They are generally a one-time charge on new development by local government as a condition of approval for a building permit to pay the development’s proportional share of capital improvements. New development requires improvements such as roads, utilities, parks, and schools as well as police, fire, and solid waste disposal ser- vices. Historically, such improvements were financed with bonds and local property taxes supplemented by state and federal grants along with subdivision dedications and fees. These public expenditures were seen as a spur to private investment. However, a combination of more complex (and costly) improvements, environmental considerations, a dramatic decline in federal expenditures on local infrastructure in the 1980s, and the property tax revolt epitomized by Proposition 13 in California led local governments to search for other methods of financing needed infrastructure. Consequently, California has been one of the leaders in the development of impact fees. Impact fees have grown increasingly popular with local governments as a supplementary financing source4. Altshuler and Gómez-Ibáñez (1993) found that approximately 60% of local gov- ernments used impact fees along with in-kind levies by the mid-1980s. The legal basis for government intervention in the development process is its police power to protect the public health, safety, and welfare of its citizens. Through a series of court cases, a set of standards have been established on the application of impact fees. These standards apply to both legislatively imposed and ad hoc fees. A government entity imposing an impact fee on development proj- ects must meet several standards (Powell et al. 2006): • Establish the purpose of the fee. • Establish the use of the fee, including public facilities to be financed. • Show a reasonable nexus between the purpose of the fee and the type of development. • Show a reasonable relationship between the public facility to be constructed and the type of development. • Show a reasonable relationship between the specific amount of the fee and the cost of public facilities attributable to the project. • Account for and spend collected fees only for the purposes intended, with a provision for returning unexpended funds. Impact fees on new development have been imposed to make improvements to transportation 4 facilities and corridors, examples of which would be informative in developing an approach that would work for base expansions (Cooper 2000; Nelson\Nygaard Consulting Associates 2004; Newport Partners and Virginia Polytechnic Institute and State University 2008). 73

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases Consequently, in most states, impact fees must meet the rational nexus and rough proportionality tests. First, there must be a reasonable connection between the need for additional facilities and new develop- ment. Second, it must be shown that the fee payer will benefit in some way from the use of the fee proceeds. Third, calculation of the fee must be based on a proportionate fair-share formula. A number of elements of the impact fee model can be applied to BRAC cases. However, the process would require some analytical rigor to ensure equity among all parties. Moreover, to date, impact fees have been assessed only at the community level and not at the state level. Nevertheless, the principles that have been used to structure impact fees at the local level can be a useful basis for allocating costs resulting from personnel increases at military bases. To avoid confusion about impact fees, it should be understood that impact fees are associated with the costs imposed by new developments; they are not based on the economic benefits new developments might provide to communities. Application of the impact fee model requires a traffic impact study. Following the impact fee model, the first step in the application is to assess the deficiencies in the existing transportation system before the person- nel increases in the military bases occurred. The cost to alleviate these deficiencies needs to be estimated. The cost would not be assessed to the military. Next is an assessment of the system improvements requirement to accommodate the additional travel demand resulting from the increases in military base personnel. The cost to meet these requirements needs to be estimated. Since the new development contributes some taxes and fees that could be used to offset some of the cost of needed infrastructure, these financial payments need to be estimated as well. Finally, the costs of meeting the additional travel demand due to the new development can be attributed to the new development based on its share of delay caused by the new traffic it generates. Allocating costs of the marginal user in these cases can require a sophisticated analysis because of the nonlinear impact of added traffic to a congested route serving a new facility. There may well be network effects that must be accounted for. In addition, the decision about how to assign costs is not completely straightforward. The marginal user added to a traffic stream that causes speed to fall and flow per hour to actually decline imposes a disproportionate cost on all other users. In the case of BRAC projects, if the military is the only source of new demand, then it would be subject to all the costs of improvement. Typically, however, even congested facilities are experiencing growth from other sources; even in this situation, there is still a decision to be made about how to assign costs across classes of new users. 74

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Funding OptiOns Whatever analytic process is used to assign costs, it should be con- sistent with the principles listed below. • The application of impact fees should be nondiscriminatory. The military should make the same contributions that a developer would have to make, if any, including whatever concessions are routinely provided. Thus, any required fee should be modeled on how impact fees are imposed on the private sector. If a region welcomes private development without charging fees or receiving exactions, then DoD should not be expected to provide support for transportation improvements for base expansion. • The military responsibility should extend only to restoring the level of service to what it was before the new traffic was added. The cost assigned to the military would be designed to alleviate the delays its action imposes on other highways, not to improve traffic flow beyond what it was previously. • The geographic area of responsibility should be defined by com- mute sheds rather than some predefined distance from the base perimeter. Commuters going to and from a military base in a metropolitan area travel across a dense network of roads, and delays could be imposed at intersections or along routes that are more than 1 mi from the base perimeter. Determining these impacts requires some form of traffic simulation modeling. • Military cost responsibility should be conditioned on the civil sector contributing its share. In estimating future delays in a network as a result of a base expansion, the analysis would need to factor in future growth resulting from the military base, along with growth associated with the long-term trend on the existing network. This future growth in civilian traffic, if any, would need to be included in assigning cost responsibility. It is not expected that a DoD impact fee would cover the whole cost of needed improvements unless it was the only source of future growth. Future economic expansion along major corridors as an indirect consequence of base expansion should also be assessed impact fees. • Nonlinearities of impacts and costs should be accounted for and reflected in the impact fee. In allocating costs imposed on traffic flow, the impact of the last marginal user tends to be the most disproportionate; thus, assigning the responsibility for this impact imposes a disproportionate cost. Assigning this cost is a nontrivial matter because, in theory, the last marginal user before traffic flow in a congested corridor reverses imposes a very large 75

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases cost. The committee’s recommended resolution of this matter is as follows: in cases in which expected traffic growth from the civil sector will complement the incremental growth attributable to base expansion, the military and the civil sector cost should be shared based on the projected share of growth on the civil side and the projected traffic added because of the military. Assuming that impact fees were paid by the military in BRAC cases, the process would require careful accounting to ensure that the proper payments are made and that the funds are used to improve the trans- portation facilities in a timely manner. It needs to be understood that the funds from impact fees would pay for a portion of the cost for the needed transportation improvement if the military is not the only source of increased demand. COnClusiOns DoD PRogRAms The official DoD policy is that, aside from the DAR program, when bases impose new transportation demand on surrounding communities, state and local governments should look to their own and traditional federal-aid transportation programs for capital and operating funds. The DAR program is the only capital program for meeting road access needs outside the base; however, it is too limited to meet the needs of metro- politan areas experiencing rapid base expansion. The eligibility criterion of a doubling of traffic, which simply cannot happen on highly congested facilities, is not appropriate in the metropolitan context. DAR, by statute, is limited to funding road improvements, even though transit is essential for meeting demand in some urban locations. Moreover, DAR applicants, once certified, must compete for funds. Base commanders experienc- ing rapid increases in personnel indicate that they have higher priorities for essential facilities on the base, such as barracks. Even when a base commander supports a DAR application, it must compete against every other capital item in the MILCON budget. Finally, once a DAR project is awarded funding, it is available for only 5 years. For localities wishing to use DAR funding as a component of a larger capital improvement, this time window is simply too short for local agencies to complete environ- mental and public participation requirements and secure funding. Other possible sources of DoD funds to tap for ongoing transporta- tion expenses, such as transit services, transit subsidies to travelers, and travel demand management programs include EULs and base O&M and 76

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Funding OptiOns employee compensation accounts. Military construction and operating and maintenance funding are authorized and appropriated for specific purposes and typically must be used or contractually obligated within specific time periods. Generally, base commanders are subject to use-it- or-lose-it restrictions that limit their discretionary use of funding made available to them. In addition, the priorities established for use of existing authorized and appropriated budgets may change during a fiscal year, as emergen- cies and other contingencies arise. MILCON and O&M funding for base operating expenses may be delayed or canceled and the funds reallocated and, in effect, often become the bill payers for such contingencies, par- ticularly when military missions change or direct military operation or war-fighting expenses increase. For a revised DAR or O&M to be relied upon for transportation management expenditures, it needs to be better insulated or fenced from competing military priorities and use-it-or-lose-it restrictions, particu- larly when (a) military funding complements nonmilitary or nonfederal funding, such as state and local transportation funds, and such outside funding is subject to planning and other regulatory approval processes that may exceed the time frame within which the military funding must be used; (b) outside funding has been committed but projects cannot proceed if the military complementary funding is rescinded; and (c) long lead times are necessary to coordinate related and required regulatory and planning approvals and stability of funding is a necessary prerequi- site for such approvals. Options to improve fencing of military funding could include specific authorization or appropriations language included in the relevant statutes or accompanying congressional reports, DoD policy statements creating priority for such funding or increasing flexibility for use by base commanders, and transfers of DoD funding to other federal entities such as USDOT, which may have longer time frames for use or obligation of such funding. non-DoD funDing souRces Funding transportation improvements in the current constrained fiscal environment is challenging. In the slow-growth aftermath of the most severe recession since the Great Depression, states and metropolitan areas are finding that they have, and expect, insufficient funds to make needed and anticipated transportation improvements. Limited federal transpor- tation funds, and uncertain prospects for a new multiyear authorization of highway and transit programs, have put greater pressure on states 77

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Federal Funding OF transpOrtatiOn imprOvements in BraC Cases and metropolitan areas. The current lack of public support to fund tax increases or increase gasoline user fees has made this problem even more difficult. Consequently, states, MPOs, and local governments have had to prioritize their transportation projects and fund only those with the highest priority and those for which they can find funding. Whereas states and regions that benefit economically from the presence of military bases should contribute to the cost of improving facilities that the military requires, and may need to reconsider their priorities in order to do so, the demands of BRAC 2005 could hardly have come at a more difficult time. The impact fee model is one approach for sharing costs between DoD and state and local agencies. Although not a perfect analogy, it is appropriate to consider DoD in a manner akin to any private devel- oper who wishes to locate a large new development in a metropolitan area. In most areas, the developer is charged a fee to cover the costs of improvements needed to serve the transportation demand the new project engenders. The developer pays these fees upfront, in addition to the stream of future revenues it pays in the form of property taxes and that its users pay in motor fuel and other taxes that directly fund transportation. Impact fees typically do not charge the full cost of the improvement to the developer unless the traffic growth attributed to the development is the sole source of new demand. Typically, growth from the civil sector is occurring, even on congested facilities. In such cases, state and local governments that benefit economically from the location of bases in their regions bear some responsibility for providing funds for base access improvement projects. Principles for assigning cost responsibility are provided in the previous section of this chapter. reFerenCes AASHTO. 2010. AASHTO Survey of the States—9,800 Ready-to-Go Transportation Projects. January. Altshuler, A. A., and J. A. Gómez-Ibáñez, with A. M. Howitt. 1993. Regulation for Revenue: The Political Economy of Land Use Exactions. Brookings Institution, Washington, D.C. Bureau of Transportation Statistics. 2010. Pocket Guide to Transportation. BTA, USDOT, Washington, D.C. Cooper, C. 2000. Transportation Impact Fees and Excise Taxes: A Survey of 16 Jurisdictions, Planning Advisory Service, Report No. 493. American Planning Association, July. Chu, D. S. C. 2008. Mass Transportation Benefit Program (MTBP). Instruction Number 1000.27. DoD, Washington, D.C. Oct. 28. 78

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Funding OptiOns Federal Transit Administration. 2009. Rail Modernization Study: Report to Congress. FTA, USDOT, Washington, D.C. Gannett Fleming, Inc. 2010. Defense Access Road Program Criteria Study. Prepared for U.S. Department of Defense, Surface Deployment and Distribution Com- mand. July 29. Kepplinger, G. L. 2008. Army—Mass Transit Benefits, Aberdeen Proving Ground. GAO, Washington, D.C. July 18. National Conference of State Legislatures. 2010. State Transportation Funding. NCSL, Washington, D.C. National Surface Transportation Infrastructure Finance Commission. 2009. Paying Our Way: A New Framework for Transportation Finance. NSTIFC, Washington, D.C. http://financecommission.dot.gov/Documents/NSTIF_ Commission_Final_Report_Mar09FNL.pdf. Oct. 28, 2010. Nelson\Nygaard Consulting Associates. 2004. City of Palo Alto, Transportation Impact Fee Nexus Study. Revised Draft Final Report. April. Newport Partners, LLC, Davidsonville, Md., and Virginia Polytechnic Institute and State University, Alexandria, Va. 2008. Impact Fees and Housing Affordabil- ity: A Guidebook for Practitioners. Prepared for U.S. Department of Housing and Urban Development, Washington, D.C. June. Powell, B., E. P. Stringham, and J. Estill. 2006. Taxing Development: The Law and Economics of Traffic Impact Fees. Working Paper 65. Independent Institute, Oakland, Calif. Dec. 13. Obama, B. 2009. Federal Leadership in Environmental, Energy, and Economic Performance. Executive Order 13514 of Oct. 5, 2009. Federal Register, Vol. 74, No. 194, pp. 57117–52127. Rockefeller Institute of Government. 2010. Revenue Now Growing in Most States; Sales Tax Gains 5.7 Percent in Second Quarter, But Totals Are Still Well Below 2008 Level. State Revenue Report No. 81. University of Albany, State Univer- sity of New York. October. U.S. Department of Defense. 2008. Defense Access Road Criteria. DoD, Washington, D.C. October. U.S. Department of Transportation. 2008. Status of the Nation’s Highways, Bridges, and Transit: Conditions and Performance. Report to Congress. FHWA PL-10-012. FHWA, USDOT, Washington, D.C. U.S. Department of Transportation. 2010. Demand for TIGER II Funding Over- whelms Supply. Press Release 177-10. USDOT, Washington, D.C. Sept. 24. U.S. Government Accountability Office. 2009. Military Base Realignments and Closures—Transportation Impact of Personnel Increases Will Be Significant, but Long-Term Costs Are Uncertain and Direct Federal Support Is Limited. Report to Congressional Committees. GAO-09-750. GAO, Washington, D.C. September. Ybarra, S. 2008. Temporary Fix for Transportation Trust Fund. Reason Foundation, Los Angeles, Calif., October. 79

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