Buttigieg confirmed as DOT leader, but funding fight looms
Infrastructure renewal plan would rely on options like an increased gas tax, vehicle miles traveled fee, public-private partnerships, or coronavirus relief bill.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Winning Senate confirmation as the next Secretary of Transportation today came fairly easily to Pete Buttigieg, but the former Indiana mayor and Presidential candidate now faces the far more difficult challenge of finding funding for his high priority goal of launching a new infrastructure plan.
Infrastructure is popular in Washington, D.C., uniting a range of industry groups behind that common goal, despite a tumultuous and violent turnover between the Trump and Biden administrations. An array of associations have greeted Buttigieg’s approval by renewing their pleas for federal leaders to craft a plan to renovate crumbling roads, rails, ports, and bridges. However, previous efforts have consistently stalled over the issue of how to fund the work.
Over the past year, President Biden campaigned on the issue, proposing to invest $1.3 trillion over 10 years on projects such as stabilizing the Highway Trust Fund to build roads and bridges, creating electric-vehicle charging networks, a national high-speed rail system, the development of low-carbon aviation and shipping technology, and infrastructure fortifications to withstand the effects of climate change.
The issue of paying for that comprehensive plan quickly emerged during Buttigieg’s January 21 Senate confirmation hearing, when he initially said a gas tax hike was “possible” but later that day said through a spokesman that it was not an option. According to published reports, Congress has not increased the 18.4-cents-per-gallon federal gasoline tax since 1993, making it now worth just 10.2 cents after adjusting for inflation.
During the same hearing, Buttigieg also discussed an alternative fundraising plan based on vehicle miles traveled (VMT), but said that approach could be hampered by privacy and technology concerns. Despite those concerns, states including Kentucky, New Mexico, New York, and Oregon currently levy some form of VMT fee, according to the nonpartisan Congressional Budget Office (CBO).
The CBO has calculated that a VMT tax of 1 cent per mile would have raised about $2.6 billion in 2017 if imposed on all commercial trucks, or about $1.6 billion if imposed only on those with one or more trailers. Either way, the the federal Highway Trust Fund needs the extra income; the agency says that the fund will be exhausted by 2022 without additional revenues or reductions in spending.
Some Republicans today pushed Buttigieg to consider the VMT approach, according to a statement from Sam Graves (R-MO), ranking member of the minority party in the House Committee on Transportation and Infrastructure. “I sincerely believe we can find common ground. For example, Secretary Buttigieg already signaled he agrees that America’s rural infrastructure needs are important and must be addressed,” Graves said in a release. “I also agree with his conclusion that increasing or indexing the federal gas tax is not a long-term solution, especially given the new Administration’s and House Democrats’ goal of virtually eliminating gas-powered vehicles. Clearly, we need to find a fairer and more sustainable method of supporting the Highway Trust Fund, and I look forward to working with Secretary Buttigieg to explore a viable replacement for the federal gas tax, such as a Vehicle Miles Traveled system.”
A third option could be encouraging private sector companies to invest in certain infrastructure features, according to a statement from the National Association of Truck Stop Operators (NATSO). “NATSO congratulates Pete Buttigieg on his confirmation as Secretary of Transportation and looks forward to working with him on a broad spectrum of issues, including the need for long-term, sustainable highway funding and policies that further encourage private-sector investment in alternative fueling infrastructure, such as electric vehicle charging,” NATSO President and CEO Lisa Mullings said in a release.
Yet another approach could be including infrastructure spending in a coronavirus relief bill now being hashed out by federal lawmakers. From their position in the Congressional majority, Democrats argue that the approach could help stimulate the sputtering economy by generating jobs, but it would need unanimous support to prevail in a chamber that is divided evenly between the parties.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.