The House passed legislation this afternoon sponsored by House Transportation and Infrastructure Committee Chairman James Oberstar, D-MN to extend the Federal law authorizing spending on federal-aid highways and transit projects which was set to expire on September 30, Reason Foundation blogger Shirley Ybarra writes.

Most importantly, the legislation does not address a looming $8.7 billion rescission of existing contract authority (enacted in the 2005 transportation law known as SAFETEA-LU and amended by a 2007 energy law), which will be executed next week by the Federal Highway Administration if not repealed. Oberstar did not discuss the rescission issue on the House floor, but his spokesman said a repeal of the rescission was left out of the measure because House rules would require an offset to pay for it through higher taxes or reduced spending elsewhere.

The rescission issue is a very real problem for the state departments of transportation as they will be negatively impacted in a total of $8.7 billion.

“This rescission will amount to real dollar losses to programs and projects, and will have a devastating effect on many state departments of transportation and reverse the positive economic gains brought about by the recovery act,” John Horsley, executive director of the American Association of State Highway and Transportation Officials. “Colorado would lose $115 million in contract authority.”

The Denver metro region will sacrifice as much as $38.5 billion a year in economic output if it fails to spend the money necessary to resolve traffic congestion, according to a study by the Reason Foundation of gridlock’s impact on economic growth.

In a study called “Gridlock and Growth: The Effect of Traffic Congestion on Regional Economic Performance,” the libertarian think tank based in California examined eight metropolitan areas, including Denver, and attempted to quantify the increase in economic production it says would result from improved mobility in free-flowing traffic conditions.

Of the eight regions, Denver had the second-biggest bang for the transportation buck, Reason reasoned. Investing at least $10 billion over the next 20 years, according to the study, would leverage up to $38.5 billion each year in added economic output – a ratio of 77-to-1.