$109 Billion To Transportation-A Big Impact On Real Estate

When President Obama signed into law the long-term reauthorization of federal flood insuranceabout two weeks ago he also reauthorized the government’s transportation funding programs. The two were part of the same bill.

We think of transportation a lot at the local level. Few things are as important to community quality of life than how well traffic flows in and around one’s metro area. Long commutes definitely don’t rate well when people are thinking about the quality of life where they live.

Transit programs are important, too, even in the car-oriented west, where many metro areas are putting in light rail or have a project in the planning stages. Studies have shown that homes along transit corridors enjoy strong values, even during downturns, as we saw in the last one.

What the big transportation law does is continue existing funding programs at $109 billion until mid-2014. The funding comes primarily from the gas tax, which is roughy 18 cents per gallon (more for diesel), with additional amounts from other, temporary sources. The additional sources are needed to close the anticipated gap between what the gas tax collects and what projects need for funding.

The gas tax money goes into the Highway Trust Fund, which dates back to the 1950s. The original idea was that the tax collections that go into the fund would flow out to states and localities to construct new and maintain existing roads and highways. The federal government keeps a portion for additional projects, including transit systems and other types of transportation infrastructure.

The trust fund continues to work the way it always has, but in part because cars are more fuel-efficient now, revenues going into the fund aren’t keeping pace with the need, so the new law brings in additional funds from other sources to supplement the trust fund to close any gap that opens up.

Bottom line: transportation is vitally important to communities, so it’s a real estate issue, and that’s why we should all follow what happens with the federal government’s efforts in funding transportation projects.

(credit NAR)

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