A new report issued Monday by Standard & Poor's highlights potential problems in funding transportation with a short-term, rather than long-term, approach.
The report, "A Short-Term Approach to Funding Leaves U.S. Transportation Infrastructure without a Solid Long-Term Plan," states that, while multiple levels of government are taking steps to renew transportation infrastructure, the federal government has thus far only offered short-term funding solutions, which would prove problematic. S&P is increasingly concerned that only a long-term funding plan will allow the sector to "maintain strong credit quality."
MAP-21, the recently passed surface transportation bill, shows that the federal government wants to find a solution to the nation's transportation funding issues, S&P states. But simply covering transportation for roughly two years is still a short-term solution.
"In our view, unless the federal government implements a targeted transportation policy with secure funding sources that extends beyond the short-term measures in the MAP-21 and recent Federal Aviation Authority reauthorization laws, substantial uncertainty will remain about where project funding will come from," the report states. "Furthermore, with federal funding declining and that trend expected to continue, the burden to finance infrastructure projects will fall more heavily on local government entities or users in the form of higher rates or tolls... This scenario doesn't bode well for getting these projects done, and it could test the credit quality of the agencies that are ultimately left to finish the job."
The Standard & Poor's report is available to subscribers of RatingsDirect on the Global Credit Portal at bit.ly/SPreportlogin. The report can also be purchased by contacting research_request AT standardandpoors.com. Additional information is available via S&P's news release.