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States That Raise Tolls and Taxes Will Have an Edge in Getting DOT Funds

The Wall Street Journal. logo The Wall Street Journal. 4/29/2018 Ted Mann

a sign on a city street filled with lots of traffic: Local agencies that raise taxes or tolls to pay for bridges, transit lines or road improvements will be more likely to win some of the federal funding for this year. Above, a toll plaza in Niceville, Fla. Local agencies that raise taxes or tolls to pay for bridges, transit lines or road improvements will be more likely to win some of the federal funding for this year. Above, a toll plaza in Niceville, Fla.

States and cities that raise taxes and tolls will have a better chance at winning federal money for roads and bridges, part of a Trump administration strategy to have states carry a bigger portion of infrastructure spending.

The move is a result of a Transportation Department overhaul to a popular infrastructure grant program, giving it a new name and tweaking the criteria that will determine which project applications will win federal funding.

Under the overhaul, which was launched last week, applicants for grants this year will be judged in part on whether they can show that they have generated “new, non-Federal revenue” to help cover project costs, according to a DOT document. That will mean local agencies that raise taxes or tolls to pay for bridges, transit lines or road improvements will be more likely to win some of the $1.5 billion pool of funding authorized for the program this year.

President Donald Trump has promised to deliver a more than $1 trillion infrastructure-rebuilding package since early in his campaign for the presidency. Once in office, the administration pursued an approach that sought to generate the bulk of that funding from states and cities, not the federal government.

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In Congress, both parties have resisted that approach, saying it would unduly burden already strapped local governments, and Mr. Trump has acknowledged that his infrastructure proposal won’t make any progress before the midterm elections. In overhauling grant programs, however, administration officials say they can pursue their infrastructure goals without any legislation.

Congressional critics say the move will penalize regions that can’t easily generate funding streams for transportation projects, such as rural areas that the lack the traffic needed to generate meaningful toll revenue, or other areas where fuel or other taxes are already high.

In a letter to Transportation Secretary Elaine Chao earlier this week, Sens. Susan Collins (R., Me.) and Jack Reed (D., R.I.), protested what they said was an attempt to embed controversial and divisive elements of the White House infrastructure plan into a successful grant program that enjoys bipartisan support in Congress.

Despite such criticism, the DOT said it plans to proceed with the program’s overhaul. “It is a priority to encourage both Federal and local investment so we can ‘grow the pie’ overall and fix our infrastructure,” said a DOT spokeswoman.

Formerly nicknamed Tiger, the National Infrastructure Investments program, originated as part of the Obama administration’s economic stimulus, and in recent years doled out around $500 million in grants to a broad range of transportation infrastructure projects around the country. In the 2018 government spending bill, Congress tripled the annual size of the Tiger program, giving the DOT $1.5 billion to issue in grants by the end of this year.

Congress has barred the DOT from considering what percentage of a Tiger-funded project would be borne by the federal government when deciding which projects would win grant awards. The administration says it complied with that requirement.

Instead, it will consider whether projects generate new revenues at the local level to help pay for a project. It will give credit for states that have raised taxes or tolls to pay for transportation projects, but only back to January 2015.

The new-revenue provision could “diminish the effectiveness of this grant program,” according to the letter by Ms. Collins and Mr. Reed, who are the chairwoman and ranking member, respectively, of a Senate subcommittee that oversees transportation funding. “These policies have not been agreed to or voted on by Congress, and there is clear bipartisan opposition to some of them,” the letter said.

The senators also suggested that states that have already raised taxes would be shut out of getting revenue credit under the terms of the grant provisions. Maine, they wrote, has a relatively high gas tax at 30 cents a gallon. But because it last raised taxes in 2011, it wouldn’t receive credit for that revenue stream when applying for new grants under the new program, now known as Build grants.

Administration officials note that the new-funding provision is one of several criteria that will be used in distributing the Build grants, and that project sponsors are instructed to explain in their applications if there are reasons they are unable to raise new revenues. The new grant criteria “does not require any particular additional local share, but the creation of new local revenues is one of a number of criteria we will consider,” said the DOT spokeswoman.

The administration already has put its stamp on the grant program, changing the distribution of the 2017 grants—the first round since Mr. Trump took office—to favor rural over urban projects. Some 64% of the grants went to rural areas in the 2017 round, compared with an average of about 21% during the Obama administration. Roughly 19% of the U.S. population lives in rural areas.

Of 28 rural grants issued by the Trump administration, more than two-thirds went to counties where Mr. Trump won a majority of the vote in the 2016 presidential election, a Wall Street Journal analysis found.

That has raised suspicions among Democrats that the administration is trying to reward its supporters.

When asked to comment about the program’s new provisions, a spokesman for Mr. Reed said in an email: “If this proposal turns out to be an effort to tilt the TIGER grant playing field to reward the President’s most ardent political backers, then it’s yet another example of the Administration’s wanton disregard and the Senate … will be forced to respond with additional restrictions on the Administration’s discretion.”

But some elected officials, like North Dakota Gov. Doug Burgum, a Republican, applaud the administration’s approach. In an interview, Mr. Burgum said his state had no plans to raise its gas tax—one of the main vehicles by which state governments have funded road and bridge improvements in recent years—but would be willing to use other taxes to generate substantial funding for infrastructure needs.

Mr. Burgum said he had voiced support during visits to the White House for policies that would reward those states that take on a larger share of infrastructure costs relative to the federal government.

“We’re ready to compete in that world,” he said.

Write to Ted Mann at ted.mann@wsj.com

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