Is infrastructure (once more) emerging as a federal priority?
Although the federal government shutdown has dominated media headlines for more than a month, another subject – a cornerstone of the Trump presidential campaign – is sneaking its way back into the news.
Trump’s proposed multi-billion-dollar infrastructure plan was expected to be a signature priority during the new administration’s first 100 days. Two years later, there has been little progress. Trump’s promises hit a few speed bumps and then the border wall became his signature priority.
However, shocking as it is, momentum for a new infrastructure plan appears to be growing. In her address to the U.S. Conference of Mayors this week, House Speaker Nancy Pelosi said she is “optimistic” an infrastructure bill will be passed this year. She told the mayors that infrastructure is one subject on which she and the President may find agreement.
Just last week, approximately 20 high-level members of the Trump administration met with the President to discuss a potential infrastructure plan to put before Congress as soon as the shutdown ends. A 13-year program is said to be under consideration. When the President delivers his on-again, off-again (currently “off”) State of the Union address, insiders say infrastructure is likely to be a significant part of his speech.
Congressional leaders may not wait for the President to lead. Some in Congress say a State of the Union mention by the President would help to boost conversations that are already underway. Earlier this month, bipartisan legislation, the Move America Act, was filed. This bill supports infrastructure reform and incorporates some of the original Trump infrastructure plan. The bill calls for an initial funding investment to encourage public-private partnerships (P3s). It also lays out a plan for consolidating state and local funds with private capital and federal funding and incentives.
Unlike Trump’s original proposal to invest $200 billion in federal funds to leverage $1.5 trillion in private-sector capital, the bill filed by Democrat Sen. John Hoeven of North Dakota and Republican Sen. Ron Wyden of Oregon calls for the creation of Move America Bonds to expand tax-exempt financing for P3s. It also creates Move America Investment Credits to incentivize private capital investments. The bill’s objective is to leverage $8 billion in federal funds into $226 billion in bonding authority over an initial 10-year period. It calls for up to $56 billion in tax credits according to Congress’ Joint Committee on Taxation.
The legislation also calls for expanding tax-exempt Private Activity Bonds (PABs) and allowing more flexibility for state and local governments for infrastructure projects and improvements.
Here’s how it would work:
PABs would be issued by either state or local governments or other public authorities. A government entity would then borrow money from private-sector investor marketplaces. The bonds would be paid back by the private-sector equity partner, most often with revenue generated by the project. And, private-sector investors would not be required to pay income tax on interest from the bonds.
The flexibility created would allow a government entity to undertake qualifying and critical projects in their states. Projects might include initiatives related to airports, roads and bridges, solid waste facilities, nonprofit hospitals, universities or other public education facilities, water and wastewater treatment plants, high speed rail, affordable rental housing and transportation.
Under the proposed infrastructure plan, Move America bonds would be allocated to each state based on population. The Move America credits would allow smaller states with aversion to issuance of more debt to trade some or all of their bond allocation for federal tax credits at a 25 percent rate. Their goal would be to leverage more private equity.
According to a summary of the bill, the Move America credits would result in reduced capital costs and would expand the pool of interested investors. Additionally, the credits could be used by states to capitalize state infrastructure banks and/or infrastructure revolving funds.
In the current era of tight government budgets, state and local leaders know that alternative revenue sources are essential to help finance a multitude of multi-billion-dollar infrastructure projects. While public officials are reluctant to take on more debt, the availability of private capital and the expertise and experience of the private partners make for an attractive package.
Infrastructure spending, when it happens as it must, will result in thousands of new infrastructure projects. And, it could result in completion of long overdue maintenance on existing infrastructure. Public support is growing. This most recent bipartisan bill signals a congressional commitment to address a plan to address the nation’s crumbling infrastructure. It’s a very good, positive first step!