Global Logistics and Supply Chain Strategies - August 2008 - (Page 14) Governors’ Summit Looks at Innovative Ways to Pay for Overhaul of Crumbling U.S. Infrastructure It should come as no surprise to anyone who uses the nation’s highways and transit systems that they are in dire need of overhaul. But who will pay for it? A recent summit of state governors called for new ideas on funding the necessary improvements. Currently, the money comes from a mixture of sources, including fuel taxes, vehicle user fees, transit fares, impact fees, bonds, property taxes, sales taxes and general funds. But the total amount spent on highways and transit still “falls dramatically short of the amount needed to maintain the current status, let alone improve the status of the nation’s transportation infrastructure,” according to a statement by the National Governors Association Center for Best Practices. The group’s summit, held in Washington, D.C. in conjunction with the U.S. Transportation Department, brought together state and federal leaders to talk about innovative funding strategies. They examined a number of ideas, especially new financing tools available to states, such as tolls on highways and bridges built rise. Recent innovations in project finance have given states more leeway in funding new construction through big capital projects that might exceed available tax revenue, although the current nationwide credit crunch might make that avenue less attractive. Finally, there is the option of public-private partnerships, which give states access to fresh capital and allow them to share responsibilities and risk. Together the partners could deliver projects in less time and at reduced cost, summit participants said. Visit www.nga.org/center. And the Bad News Continues: Bankruptcies Grow, While Economic Prospects for 2008 Remain Dim Also in the category of News That Isn’t So New: Business bankruptcies continued their “relentless upward pace” in the first quarter of this year, according to Euler Hermes ACI. Reports on the recent performance of the U.S. economy just seem to be getting worse, with an average year-over-year increase of 42 percent in business bankruptcy filings through five consecutive quarters, according to data from the Administrative Office of the U.S. Courts. The culprits are familiar: high energy prices, weak consumer spending, job losses and the credit crunch, according to Dan North, chief economist with Euler Hermes. “These forces are likely to continue for some time and to put increasing pressure on bankruptcies,” he said. One way to predict the trend is to look at bankers’ current lending conditions. When more than 20 percent of respondents to a quarterly Federal Reserve survey say they are increasing the spreads for loans to smaller businesses, then bankruptcies usually rise in the following quarter. Euler Hermes, an insurer of business-to-business accounts receivable, continues the drumbeat of negativity in another report which sees no economic recovery for businesses this year. North finds growing evidence that the nation is in a recession, despite the refusal of the National Bureau of Economic Research to call it so (at least as of early July). Real gross domestic product was positive over the past two quarters, he acknowledged, but when net exports are factored out, the results are declines of 0.4 percent in the fourth quarter of 2007, and 0.1 percent in the first quarter of 2008. And while real income has held up, real wages have been falling on a year-over-year basis for six consecutive months, North said. Other danger signs include shrinkage in non-farm payrolls as well as drops in industrial production and real retail sales, with the trends evident for three to six consecutive months. Meanwhile, gas prices have hit record highs and highway vehicle miles are down. “Certainly this data suggests recessionary conditions,” North said. He sees “significant difficulties for businesses into 2009.” Visit www.eulerhermes.com. with federal aid. A combination of expanded tolls and the use of high-occupancy toll lanes would raise revenues while reducing congestion, participants said. Congestion pricing is another idea that has recently been gaining traction. Proponents argue that it helps to ration limited road space during peak traffic periods while generating funds for transit improvements and road maintenance. Yet another proposed fee, the vehicle miles traveled (VMT) tax, could prompt drivers to cut down on unnecessary trips, with demand further reduced through mileage-based insurance policies. Opponents argue that the VMT tax raises privacy concerns, in light of the tracking and reporting technology to which it would give 14 AUGUST 2008 http://www.nga.org/center http://www.eulerhermes.com
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