Transportation Market Outlook

U.S. Transportation Market Outlook:
The Road Ahead
April 15, 2010

Agenda

 Introductions and Background
 The Next Economy
 Surface Transportation – ARRA & Future Prospects
 2010 Transportation Market Outlook
 Q&A

© Onvia, Inc. 2010 Confidential and Proprietary Information 2

About Onvia
Onvia is the leading provider of gBusiness solutions in the United States

 8,500 clients who sell to government, subcontract or supply
 Identify and qualify actionable business development opportunities
 DemandStar eProcurement Platform - 6,000 government users
 Largest public sector procurement database
 Primary markets served:

 Energy/Environmental/Water
 Architecture/Design, Engineering, Construction (Infrastructure)
 Information Technology/Telecommunications
 Medical/Healthcare
 Vehicles/Equipment
 Professional Services
 Operations & Maintenance


Trusted Data Source


The Next Economy

The Federal, State and Municipal Market


The Next Economy (cont’d)

Government Spending is almost 50% of GDP


The Next Economy (cont’d)

Businesses are Preparing for ‘gBusiness’ Arena


Recovery Act Implementation and
Future Prospects for Surface Transportation

Joung H. Lee
Associate Director for Finance and Business Development, AASHTO

Session Objectives

 To provide an update on state spending levels
 To report and show lessons learned form Recovery
Act implementation
 To discuss the state of current surface transportation
funding, including the Federal Highway Trust Fund
conditions
 To provide AASHTO’s funding framework for the
future
 To give the latest update on current program
extension and surface transportation reauthorization

© AASHTO 2010 Confidential and Proprietary Information 9

Transportation Spending Cuts
in 21 States in FY 2010
 Arizona  Nevada
 California  North Carolina
 Connecticut  New Jersey
 Florida  New York
 Georgia  Ohio
 Kansas  Pennsylvania
 Louisiana  South Carolina
 Massachusetts  Virginia
 Maine  Washington
 Michigan  Wisconsin
 Mississippi

Source: National Association of State Budget Officers


American Recovery and Reinvestment
Act (ARRA) of 2009

Overall Features
 $48.12 billion to USDOT
 100 percent Federal share
 Maintenance of effort required
 Periodic reporting of economic impact of stimulus
spending
 $1.5 billion in TIGER discretionary grants
(Up to $200 million for TIFIA credit assistance)


Recovery Act Provisions

Highways
 $27.5 billion total
 Met statutory 100% obligation goal
Transit
 Met statutory 100% obligation goal
Passenger Rail
 $8 billion for intercity passenger and high-speed rail
– Grants awarded 28 January 2010
 $1.3 billion for Amtrak
Aviation

Recovery Act Progress Report

Federal Highway Administration reports as of 29 January:
– 11,100 highway projects have won federal approval to proceed
– 7,050 highway projects are under contract or ready to proceed
– 2,140 projects are already completed
Federal Transit Administration reported as of 4 February:
– It had obligated $7.2 billion of its recovery funding to over
700 projects, nearly 87 percent of available funding
– Another 220 project applications, valued at $1.1 billion were
under review
Bids have come in across the country at 10% to 30% under
estimates, leading to more work being accomplished


Recovery Act Progress Report

As of 7 January 2010:
 1,125 bridges had been improved, replaced or newly
constructed
 21,400 miles of pavement were either improved,
resurfaced or widened
 1,700 miles of safety traffic management projects
were implemented
 Over 630 miles of bike lanes, sidewalks or
environmental mitigation projects were underway
 7,450 buses have been purchased and 1,637 bus
shelters constructed


Recovery Act Jobs Impact

 280,000 direct, on-project jobs have been created or
sustained across the country
 Total employment from these projects, which includes
direct, indirect, and induced jobs, reaches almost
890,000 jobs


Economic Recovery
Key Points

 State DOTs are utilizing stimulus dollars
quickly and demonstrating accountability

 However, economic recovery plan cannot be a
substitute for long-term investment goals that
must be articulated and implemented in the full
transportation authorization


Highway Account of the Highway Trust Fund:
Receipts and Outlay Discrepancy

50 15

45 $41.8
10
40

35 $30.4 5
($ billions)

30

25 0

20
-5
15

10
-10
5
-$11.4
0 -15
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Negative Annual Cash Flow Highway Account Outlays Highway Account Receipts
*Excludes $8.017 billion transfer from General Fund to Highway Account of HTF in September 2008.
**Excludes $7 billion transfer from General Fund to Highway Account of HTF in August 2009.


Ensuring Highway Trust Fund Stability

Source: Federal Highway Administration


Purchasing Power Loss of the Highway Program

$60 $55.0
$51.8
$50 $42.0
(Billions)

$40 $32.5
$30
$20
$10
$-
FY 2003 Actual FY 2003 Young-
Funding Enacted as of Inflated for Oberstar $375
Level May 2008 Cost Billion
Increases Proposal
(PPI)

Source: Transportation Weekly


Surface Transportation Authorization Act of 2009
Funding
 Total funding $450 billion; a$500 billion with High Speed Rail
 $337.4 billion in Highway investment
– $100 billion for Capital Asset Improvement (NHS, IM, Bridge)
– $50 billion for Metropolitan Mobility and Access (MMA)
– $25 billion for Projects of National Significance
– $162.4 billion for other FHWA-administered programs (e.g.
Highway Safety Improvement, Surface Transportation, CMAQ,
Freight, etc)
 $99.8 billion transit
– $87.6 billion from HTF
– HTF share was 15.2% in SAFETEA-LU; it is increased to
19.5% in STAA
– $12.2 billion from GF
 $50 billion high speed rail corridors
 $12.6 billion Motor Carrier Safety

Surface Transportation Authorization Act of 2009

 Specific authorizations are not included in the bill nor
are the apportionment formulas
 While the top line numbers are in the bill there is no
specific breakdown by category and no formulas or
runs that would show state shares or return on
contributions
 There is no revenue title to be bill yet


Legislative Recommendations
Between 2010 and 2015, in order to invest in a robust surface
transportation program to meet significant national needs,
Congress should fund a $565 billion multimodal program
comprised of:
 Highway program funded at $375 billion
(2015 level = $75 billion)
 Transit program funded at $100 billion
(2015 level = $20.8 billion)
 Freight program funded at $40 billion
 Intercity passenger rail program funded at $50 billion


 Federal government must continue to play a strong role in
investing and maintaining an integrated and multimodal
national surface transportation system
 States and local governments should be provided with
maximum flexibility to use federal revenues from existing core
sources to meet systemic transportation needs
 Strong accountability measures must accompany
substantially increased funding to ensure resources are spent
as efficiently and effectively as possible
 We need to restore purchasing power by making sure the
impact of inflation on commodities and construction costs must
be addressed in setting investment levels


 Adopt a long-range approach to funding the surface
transportation system that gradually moves away from
dependence on the current motor fuels tax to a distance-
based direct user fee such as a fee on vehicle miles traveled

 Assure that any climate change legislation that creates a
new revenue source, either through a carbon tax or cap-and-
trade, provides substantial funding for transportation

 Eliminate or drastically limit earmarking in federal
transportation programs


Proposed Program Funding Levels
to Restore Purchasing Power

Potential Program Name 2010 2011 2012 2013 2014 2015 TOTAL
Preservation and Renewal $28.00 $30.80 $33.60 $36.40 $39.20 $42.00 $210.00
Highway Freight (Based on Existing Revenues) $2.40 $2.64 $2.88 $3.12 $3.36 $3.60 $18.00
Highway Safety Improvement Program $2.60 $2.86 $3.12 $3.38 $3.64 $3.90 $19.50
Operations $2.40 $2.64 $2.88 $3.12 $3.36 $3.60 $18.00
Transportation System Improvement/Congestion Reduction $11.10 $12.21 $13.32 $14.43 $15.54 $16.65 $83.25
Environment Program $3.50 $3.85 $4.20 $4.55 $4.90 $5.25 $26.25

TOTAL - Highways $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $375.00

TOTAL - Transit $12.5 $14.2 $15.8 $17.5 $19.2 $20.8 $100.00

TOTAL - Freight (Based on New Revenues
$4.2 $5.2 $6.2 $7.2 $8.2 $9.2 $40.00
Outside of Highway Trust Fund)

TOTAL - Intercity Passenger Rail $5.0 $6.3 $7.7 $9.0 $10.3 $11.7 $50.00

GRAND TOTAL $71.67 $80.67 $89.67 $98.67 $107.67 $116.67 $565.00


Hiring Incentives to Restore Employment
(HIRE) Act – HR 2847
 $17.6 billion package
 Signed into law on 18 March 2010
 SAFETEA-LU Extension
– Extends SAFETEA-LU at pre-rescission FY 2009
spending level until 31 Dec 2010
– Credits Highway Trust Fund with $19.5 billion in
foregone interest payments
– Allows Highway Trust Fund to accrue interest
– Fuel tax credit for exempt fleet to be covered by the
General Fund
– Restores the $8.7 billion contract authority rescission
contained in SAFETEA-LU
 Build America Bonds expansion to cover other
qualified tax credit bonds

Current State of Play

There is great uncertainty right now
 Still no solution on paying for a six-year bill
 Senator Voinovich received promise from Senator
Reid to pass reauthorization by the end of the year
 Senator Boxer promises to mark up the EPW bill by
the end of the year
 USDOT “principles” forthcoming
 Earmarks ban in the House


Current State of Play

 Broader variables: unemployment situation and
deficit-spending appetite
 It is important to pass the six-year authorization bill soon,
as state DOTs and contractors depend on long-term
investment time horizons
 Any action should not reverse the progress made
through the stimulus legislation


Thank You
Joung H. Lee
Associate Director for Finance and Business Development

AASHTO - American Association of State Highway and Transportation Officials
444 North Capitol Street NW, Suite 249
Washington, DC 20001
Phone: (202) 624-5818
Fax: (202) 624-5469
Email: jlee@aashto.org
Web: www.transportation.org


2010 Transportation Market Outlook

Michael Balsam
Chief Strategy Officer, Onvia

2010 Infrastructure

 Market expected to grow 8%+ fueled by unspent
recovery funds
 New ARRA funded transportation projects
 HIRE bill will likely push out transportation spending bill
 Project costs beginning to rise
 Continued strong competition for projects


2,800 New Projects In Q1 2010


Project Costs On The Rise

Q1 key road construction
commodities such as
asphalt paving mixtures
were up almost 50% over
February 2009, with
overall inputs to highway
and street construction up
5.4% for the same period..


Strategic Considerations for 2010

 Competition/pricing pressure will vary in major metros
vs. outlying areas
 Higher volume of smaller dollar projects
 Local preference changes
 Importance of getting registered
 Many stimulus jobs going to firms with existing contracts
 Differentiate rather than just quoting at lower margins
 Partner with minority-owned businesses
 Businesses must engage with government or be left
behind the Next Economy


Questions


Thank You
Michael Balsam
Chief Strategy Officer

Onvia, Inc.
509 Olive Way Suite 400
Seattle, WA 98101
Email: mbalsam@onvia.com
Web: www.onvia.com


Transportation Market Outlook

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