Roger Millar, AASHTO's new president and chief of Washington's Department of Transportation, joins Caitlin Devitt to talk about the rollout of the Bipartisan Infrastructure Law, how a tight labor market and inflation are impacting capital plans, what a divided Congress means for transportation and an update on the Pacific Northwest's high speed rail project. (24 minutes)
Transcription:
Caitlin Devitt (00:03):
Hello and welcome to another Bond Buyer podcast. I'm Caitlin Devitt, Infrastructure Reporter for the Bond Buyer. I'm here today with Roger Millar, the new president of the American Association of State Highway and Transportation Officials. ASHTO... most of our listeners know who ASHTO is, but for those who don't, ASHTO shows the chief lobbyist or liaison between state departments of transportation and the federal government, basically the voice for state road infrastructure in the nation's capital. Millar became ASHTO's president in November, late October, I think and he'll serve a one year term like most presidents. He's a longtime land use and transportation engineer, and he has been the head of Washington State's Department of Transportation since 2016. Welcome, Roger. Thanks for being here.
Roger Millar (00:46):
Oh, thank you for having me.
Caitlin Devitt (00:47):
So you take the helm of ASHTO as we head into basically the second year of the rollout of the $1.2 trillion infrastructure law. Tell me, how do you think the rollout's going so far?
Roger Millar (00:57):
I think all things considered is it's going pretty darn well. 80% of the money in the IIJA at least related to highways was in formula grants to the states and the states are used to spending those dollars. We've had programs in place, we are anticipating receiving them and the money is being spent on infrastructure. There are unprecedented investments in public transportation and in rail transportation. And ASHTO is a transportation organization, not a highway organization. So we're tracking that as well over a lot of the work that we do as states with Amtrak is affected by IIJA. Here in Washington State. Amtrak Cascades is funded by the Washington State, DOT and the Oregon DOT Amtrak does the work under contract to us and a lot of states have similar relationships. So almost half of Amtrak's ridership is coming from these state partnerships and we're seeing new resources there and that's exciting.
(02:13)
We work in Washington State and my colleagues around the country work with transit agencies. Generally the larger transit agencies have a direct relationship with the Federal Transit Administration, but an awful lot of FTA money goes to smaller transits through the DOT. So we're seeing that money gets spent. On the discretionary grant side of the equation, we had the RAISE grants and the INFRA grants. They've been called different things by different administrations, but right now it's RAISE and INFRA and new resources came to those programs and the administration's getting the NOFs out, the notice of funding available and we're spending the money. There are a bunch of new discretionary grant programs and as the administration has been able to get guidance out and do the rulemaking and then get the funding opportunities out we're seeing a lot of good stuff happen. So the money is getting applied by the state DOTs all around the country.
Caitlin Devitt (03:21):
Good. Okay. So what do you view from your new perch? What do you view as the most pressing challenges for state DOTs and what are some of your goals during your term?
Roger Millar (03:31):
Well, that's a great question. My primary challenge and my colleagues primary challenge around the country is the availability of workforce to do this work. We've seen the baby boom generation aging out of the workforce. I mean, okay, boomers, nice to say we need those people. And there is not as many young men and women coming into civil engineering and the construction trades coming into the public sector. And so we have a shortage of engineers to design the projects. We have a shortage of contracting personnel to deliver the products nationwide maybe a half a million people that we could use. And that is a concern to everybody that I talked to in the DOT space. Another thing that's really important to recognize is that the federal program is not the nation's transportation program. It's a vital component of it. But yeah, here in Washington State, federal money makes up about 15% of my budget. Most of the money that is spent in Washington State on infrastructure is raised at the state level or raised locally. And all around the country have different issues with people understanding that and applying not just the national money, but the other resources to the nation's infrastructure needs.
Caitlin Devitt (05:17):
So what are some of the solutions you think the labor shortage and what are some of the obstacles? Is it pay? What's causing young people not to want to go into that ?
Roger Millar (05:26):
Part of it's pay. Part of it is stigma. If you don't go to college, you're a failure. I've heard people say that if you're not sure what you want to do go to community college, get into an apprenticeship and become a journeyman in your trade. And by the time all your friends graduate from college, you'll be ready to hire them as employees because there are good solid family wage jobs and the opportunity for a career working with labor in the construction trades. And we need to acknowledge that and celebrate that. For me, in the public sector, our engineers are paid roughly 25% below the market, and that's just a reflection of how salaries are set at the state level. It's not unique to Washington. I think every state DOT has that challenge. And we need to do something about the salaries we pay our young men and women and we need to do something as a nation to make it, I mean, it truly is honorable to be a public servant. It is noble work. We need to recognize people for that and not drag 'em through the mud because they choose to dedicate their lives to public service as opposed to something else.
Caitlin Devitt (07:02):
I know the White House has talked about, the administration, I should say, has talked about this a lot too in terms of the labor shortages affecting the ability to get all the infrastructure work done that they want to get done. And I know they've kind of started this or they're, I'm not sure if they're standing up their own programs, but they're definitely encouraging states to do that. We see some states kind of creating pathway programs.
Roger Millar (07:23):
Oh yeah, we're doing some amazing stuff. Our pre-apprenticeship support services program is bringing young men and women, particularly women and people of color into the construction trades. I mean, that is a great opportunity disguised as this problem of labor shortages is there are a lot of people who traditionally have not been welcomed in this industry. And we're recognizing, organized labor is recognizing, the contracting communities, recognizing that women and people of color are an incredible resource as we move forward. So we at WashDOT, 15% of the labor hours on our contracts are required to be performed by apprentices. Right now, 45% of the apprentice hours on our contract are performed by women and people of color and we're trying to make the construction work site a welcoming workplace. We're working with this pre-apprentice support services. We're paying for stuff like bus fair and daycare and lunch money, getting your car fixed, your rent if you need it while you become an apprentice and setting people up for success in this industry.
(08:40)
We have a great program that we have just done, youth direct, with the hire workers here in Washington State where we took young men and women who were aging out of foster care and aging out of juvenile justice. We enrolled them in a pre-apprenticeship program with the iron workers and in four weeks they graduate on Friday. On Monday, their an apprentice iron worker making a good wage and we helped them with housing and other services that they needed to get started. And it's money well spent because those men and women are one filling that need in the construction trade and they are becoming productive members in society as opposed to some of the things they might go if they were just cut adrift when they reached 18.
Caitlin Devitt (09:33):
Those are some serious benefits. So how much do you think that this labor shortage, considering the IIJA funds are allocated over five years? It's a five year program, it's kind of tough to get that nice pipeline of workers up and running by then. And we also have the other challenge of inflation. So how much do you think the tight labor market inflation are affecting projects? Are people canceling? Are people scaling back? Are people delaying? How much do you think it's affecting capital plans?
Roger Millar (10:07):
Well, the labor market and supply chain are resulting in cost escalation and cost escalation means we're spending the money, but we're not getting as much for spending the money as we would've last year or the year before or the year before that. The thing to remember too about IIJA is that it is a five year program. It replaced the FAST Act, the last five year program, which replaced the program before that, it was an unprecedented bump. It was about a 20% bump on the highway side in funding and significantly more on the rail side and the transit side. But it is a cyclical thing. We'll be back talking about this four years from now. In fact, we'll be talking about it earlier than that cause we'll be trying to get prep for that. So I think what the labor crunch and the supply chain issues are doing right now is we're seeing cost escalation, but whether it's a five year program or not, we need to address the labor shortfalls that we're experiencing and we need to address the pipeline of getting steel and concrete and other products to our job sites and into our infrastructure.
Caitlin Devitt (11:27):
Have you guys at WashDOT, have you scaled back or postponed any projects or seen massive budget increases that kind of left you questioning what to do?
Roger Millar (11:39):
Well, we're tracking things. A year ago our projects, when you looked at 'em in total, were coming in on or below our engineer's estimate of what they would cost. Now they're coming in 10% and 15% above what our engineer's estimate was and that that's a change. And we're acknowledging that change. We're not seeing drastic shifts, but we are seeing that 10% to 20%, which means at the end of the day, if Costco up 10% to 20% and the money's the same, it means you're going to do 10% to 20% less in terms of what you will deliver on the ground.
Caitlin Devitt (12:22):
Okay. We'll be right back after this important message. And we're back talking with Roger Millar, president of ASHTO. So we have a newly Republican house, very razor thin margin, newly Republican House, which means a new Chairman of the House, transportation Infrastructure, Missouri's Sam Graves, along with chairs of other committees. Are you watching or looking at anything in particular in Congress this year that will affect state DOTs? And also do you think divided Congress will present any challenges or maybe opportunities?
Roger Millar (12:56):
A divided Congress presents a challenge to the nation. One of the things that we're encouraged about is that traditionally the infrastructure side of what the Congress does, the Transportation Infrastructure Committee and the Senate side environment Public Works Commerce, the others that are involved in our transportation infrastructure policy conversation have been largely bipartisan. And we are encouraged that everything we're hearing from the new chair or the new ranking member Congressman Larson has been bipartisan and we're looking forward to having conversation with the Congress about how we're doing and implementing the IIJA and going forward. I don't see it from the perspective of what we do as having a particularly large or particularly big change in impacts from what we've seen before. Now we can get caught up in the other partisan stuff and that then I start saying the Serenity Prayer
Caitlin Devitt (14:11):
Larson is Washington. Right?
Roger Millar (14:14):
Is correct.
Caitlin Devitt (14:15):
The ranking member. Right. So you guys all have that voice there and they're going to be doing the FAA legislation this year. So that'll be big. Boeing is big, right?
Roger Millar (14:25):
Yeah, no, Larson is a longtime friend of the Washington State Department of Transportation. He was the chair of the aviation subcommittee. Now he is the ranking member. It'll be good to have him in that role.
Caitlin Devitt (14:39):
They have promised a lot of oversight in the infrastructure on at least how the federal agencies are allocating it, how it's being spent. Although there's not much the Republicans would be able to do to disrupt the flow of funds even if they didn't like it. So let's talk for a minute about revenue declining gas taxes. Big topic. It's a primary revenue for most state transportation departments. Correct me if I'm wrong, but I believe it is. That's also, I know the primary revenue behind most bonds that finance, transportation infrastructure for states. Washington, like most states, is facing pressure because of declining gas taxes. The federal, on the federal side, the highway trust funds on track to insolvency. I think maybe the next decade or so. Lots of people think the gas taxes needs to be replaced with a user fee that applies to all vehicles. For example, a charge per mile driven. What do you think about this challenge and how do you think state DOT should address it?
Roger Millar (15:34):
Well, the way that we decided in the past to fund the transportation system, the surface transportation system anyway, has always been this kind of user pays concept. So transit users, pay rail users, pay people that are right on our Washington State series system pay and we paid at the pump for transportation service. It's now for decades. That has not been in entirely true. There's a significant general fund contribution at the federal level into the transportation space and at the state and local level property tax, sales tax, other things go into transportation funding as well. But with the push and the legitimate push, we need to decarbonize the transportation space. We have an obligation to our children and our grandchildren to take care of this problem. And so what you're seeing is a big push to electrify passenger transport, to do work with hydrogen fuel cells and other technologies, but getting away from hydrocarbons.
(16:46)
And one byproduct of that is as you have more electric and fuel cell vehicles on the road, you're going to have fewer gas and diesel vehicles on the road, which means you're going to be coming up with less money. So if we're going to stick to the concept the tradition of user paying, then we need to come up with a new user fee. And a mileage based user fee has been explored extensively around the United States and around the world. Oregon has one, Utah has one. Hawaii's developing one. We've been studying the heck out of it. A number of the DOTs around the country have created a road user charge consortium called Ruck America that's looking at the future of this. But how you fund stuff is always contentious. We're going to have to do something about it though, because gas tax doesn't work in a transportation space. That doesn't include gasoline, obviously.
Caitlin Devitt (17:52):
Yeah, I think IIJA, I might be getting this wrong, but in some national pilot program for charge per mile driven that they're going to be. So they're kind of trying to do that on a national level. Cause I think those regional, those ones you talked about with the states getting together, those are, there's one in the Northeast, a big one, and so they're regional. So the national one would be interesting to see how that comes out. So what are your thoughts on public private partnerships as a way to take care of some of the infrastructure needs? Either asset recycling, which sort of privatization of existing assets or using P3s to build infrastructure, new infrastructure from the ground up.
Roger Millar (18:34):
I went to Australia with then Governor Hogan, and when he was at the National Governors Association, we sought asset recycling. A lot of what the Australians privatized through asset recycling has always been private here in the United States. And what they're doing in the transportation space is primarily toll roads. And we have a tradition of that here in the United States. There have been some interesting public-private ventures in terms of tolling authorities and creating express tolling projects and things like that. We're doing that here in Washington State within government without that public-private partnership aspect to it. Something I'm interested in, I've always been interested in. is value capture. When we make transportation investments, it has a dramatic effect, generally, on the positive side, on value of land how do we capture some of that increase in value to pay for the infrastructure improvements that make that value happen in the first place?
Caitlin Devitt (19:43):
So what's an example of that? Can you give me an example of how that would work?
Roger Millar (19:47):
Well in a previous life, I was the project manager for the Portland Streetcar down in Portland, Oregon. And while we were doing the Portland Streetcar project we went to the developers in the Pearl District of Portland and said, we're thinking about building a streetcar. If we built it, what would you do to support it? And the developers in the Pearl District said they would increase density, they would make a commitment to affordable housing and they would help pay for the project. So they created an improvement district that funded 20% of the capital cost of the street car. And they also supported the enterprise Portland Street Car Incorporated when we went to the city and asked for an increase in parking revenues, a parking fee increase in the city's parking garages that was dedicated to building the streetcar and an increase in on street parking rates to pay for the operation of the streetcar.
(20:57)
And you think of the last time the business community went to the city council and said raise parking rates. Yeah, it was a little different. But they together funded a considerable percentage of the Portland streetcar project. Now since the streetcar's been built, there's been in excess of $5 billion in increase in assessed value along the alignment; building that project added value to the land. The people who owned that land recognized that and they contributed. Yeah, we in the transportation space often approach this like the little kid who mows your lawn and then knocks on the door and asks for money. You've already added the value. Why should I pay for it right. We need to have those contingent relationships discussed and agreed to upfront as a part of project development.
Caitlin Devitt (21:49):
So I just want to ask you about one interesting project you guys have going on in Washington, which is the Cascadia High speed Rail. I think your DOT put in some money, maybe $150 million last year to study it or to do something for it. Tell me, high speed rail, we don't really have it here in the U.S. There was a couple efforts in California. There's in Texas, the Bright Line. There's these different efforts that are in various stages of getting off the ground. How's the Cascadia High Speed Rail? What do you see the future of that and how does it fit into that kind of high speed rail effort?
Roger Millar (22:28):
That's a great question. We're excited about it. I want to make real clear, I don't fund anything. Two things I don't do as Secretary of Transportation, I don't appropriate money and I don't make state policy. That's our legislature and our governor Inslee. So the High Speed Rail Initiative is an initiative championed by governor Inslee and by Tina Kotek the governor of Oregon and the premier of British Columbia. Our state legislature appropriated $4 million in the last session to us to begin the planning of that work. And then they also set aside $150 million to match any federal grant funds that we might perceive. And so we are in the process right now of preparing with our colleagues in Oregon, our colleagues in British Columbia, on both the public side and the private side. We're working with the business community in British Columbia, the business community here in Washington, the business community in Oregon and with local governments. We're all working together on this, but we're putting a planning grant in to the Federal Railroad Administration and our hope is that we can advance the project.
Caitlin Devitt (23:39):
Is that the grant? Is that IIJA grant or is that separate from that?
Roger Millar (23:44):
It's in the IIJA program. It's a part of the big big bump that the Federal Railroad Administration got.
Caitlin Devitt (23:51):
Yeah, they did get a huge bump. Well, Roger Millar of ASHTO, thank you very much for being here with me today and thanks to the listeners of this latest Bond Buyer podcast. Special thanks to Kevin Parise, he did the audio production for this episode. Don't forget to rate us, review us and subscribe at www.bondbuyer/subscribe. For the Bond Buyer, I'm Caitlin Devitt and thanks for listening.