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Final Stimulus Legislation to Create Development Opportunities through Transportation Infrastructure Funds

By Peter N. Kochansky
February 19, 2009
People: Douglas M. Husid, Peter N. Kochansky
PDF

On February 17, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”). Of the $787 billion in federal funding and tax cuts provided for in the ARRA, approximately $48 billion will fund improvements to highways, railroads, public transit, airports, and other transportation-related projects. The ARRA will create new transportation-related development opportunities and has the potential to provide funding needed to jumpstart stalled infrastructure projects. States and municipal governments have been compiling lists of shovel-ready projects and initiatives that are eligible to receive ARRA funding. Because strict timing requirements for allocation of the funds and “use it or lose it” restrictions are attached to much of the funding for transportation infrastructure projects, public agencies will need to assess the eligibility of projects quickly.

The $48 billion designated for transportation projects in the final legislation represents an increase of approximately $2 billion from the transportation funding called for in the House and Senate bills. The ARRA includes competitive grants for transportation infrastructure projects proposed by the Senate but reduces the amount of such grants to $1.5 billion from the $5.5 billion recommended by the Senate. The amounts designated for highway, public transit, and airport projects in the ARRA are similar to those indicated in the Senate bill, and the available funds for railroad projects was tripled.

The following is a brief description of the transportation infrastructure provisions in the ARRA.

Competitive Grants

The ARRA will fund $1.5 billion in competitive grants to be awarded to state and local governments or transit agencies for highway, bridge, public transit, rail, and port infrastructure investments that will have a significant impact on the nation, a region, or a metropolitan area. Individual grants will be between $20 million and $300 million, and not more than 20% of the available funds may be awarded to projects in a single state. Priority will be given to projects that can use the federal funds to complete an overall financing package and can be completed within three years of enactment of the ARRA.
The Secretary of Transportation (the “Secretary”) will publish evaluation criteria for these grants within 90 days, and applications for funding will be due within 180 days after the criteria are published. The Secretary will then have up to one year after enactment of the ARRA to select projects to receive funding.

Highway Infrastructure

$27.5 billion is allocated for highway investment projects, a $2.5 billion reduction from the amount provided for in the House bill. Available funds will be apportioned among the states within 21 days of enactment of the ARRA. Generally, at least half of the funds received by a state must be obligated within 120 days, and 100% of the funds must be obligated within one year; any un-obligated funds will be redistributed to other states. Priority will be given to projects that are projected for completion within three years and are located in economically distressed areas.

Public Transit

$8.4 billion in ARRA funding will be directed at public transit projects, which is the same amount that was allocated for public transit in the Senate bill. This includes $6.9 billion for transit capital assistance grants and $750 million for the modernization of existing public transit systems. $750 million is available for capital investment grants for new commuter rail or other light rail systems, and priority in awarding these grants will be given to projects that are currently in construction or are able to obligate funds within 150 days of enactment of the ARRA.

Railroads

A total of $9.3 billion is designated for improvements to rail transportation, which represents an increase of about $6.2 billion from the Senate bill and an $8.2 billion increase from the House bill. Of the $9.3 billion, $8 billion is available for capital grants for high speed rail corridors and intercity passenger rail service. The remaining $1.3 billion has been reserved for capital grants for Amtrak infrastructure.

Airports

$1.1 billion is allocated for grants to airports for capital investments, and $200 million is designated for investments in Federal Aviation Administration infrastructure.

Maritime Administration

$100 million is designated for grants to small shipyards for investments and improvements.

 

The authors, Peter Kochansky and Elizabeth Lorenz, are members of the real estate group at Goulston & Storrs.

If we can assist you in analyzing the ARRA’s application to a particular project, please contact:

Douglas M. Husid
617.574.4139
dhusid@goulstonstorrs.com

Peter N. Kochansky
617.574.3527
pkochansky@goulstonstorrs.com

This client advisory should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

Pursuant to IRS Circular 230, please be advised that, this communication is not intended to be, was not written to be and cannot be used by any taxpayer for the purpose of (i) avoiding penalties under U.S. federal tax law or (ii) promoting, marketing or recommending to another taxpayer any transaction or matter addressed herein.

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