Transportation

Government Initiative to Kick Start Ailing Economy

On February 17, 2009, the federal government signed a key element of President Obama’s $787 billion stimulus package to support the ailing economy. Accordingly, 75% of the funds needed to be deployed within the first 18 months of the bill’s passage with some funding available within the first 90 to 120 days.

Of the total amount, the American Recovery and Reinvestment Act (ARRA) had injected a total of $48.1 billion for transportation infrastructure projects to be administered by the U.S. Department of Transportation. Of this, $27.5 billion is earmarked for highways and bridges, $8.4 billion is for transit, $8 billion is for high-speed rail, $1.3 billion is for Amtrak, $1.5 billion is for discretionary infrastructure grants, $1.3 billion is for airports and Federal Aviation Administration facilities and equipment, and $100 million for shipyards. The funding would provide additional efficiencies that the logistics sector would be able to leverage.

Additionally, about $620 million was allocated for technological improvements at shipyards, such as procurement of non-intrusive inspection technology at sea ports to scan cargo containers. Other benefits include $300 million in funding for the U.S. Environmental Protection Agency (EPA) to issue grants targeted at retrofitting older diesel engines with emission cutting equipment.

According to Section 179 of the IRS tax code, companies can now choose to expense the entire cost of depreciable, tangible assets in the year of purchase, as opposed to allocation of depreciation over its useful life. In 2008, the amount that could be expensed was increased to $250,000 a year; the new proposals extend the $250,000 to 2009. ARRA also provides tax benefits by extending the carryback period for net operating losses from two years to five years, resulting in an increase in savings of 158% for the air freight and logistics industry.

According to Section 179 of the IRS tax code, companies can now choose to expense the entire cost of depreciable, tangible assets in the year of purchase, as opposed to allocation of depreciation over its useful life. In 2008, the amount that could be expensed was increased to $250,000 a year; the new proposals extend the $250,000 to 2009. ARRA also provides tax benefits by extending the carryback period for net operating losses from two years to five years, resulting in an increase in savings of 158% for the air freight and logistics industry.

The long-term benefit to the logistics and distribution industry will come from efficiencies created from investment in transportation infrastructure. Each year, billions of dollars are lost due to delayed shipments resulting from congestion within the transportation system.