Infrastructure

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RECENT DEVELOPMENTS

  • Sept. 25, 2017:  CBO presentation on “Approaches for Increasing the Productivity of Federal Infrastructure Spending”
  • Aug. 10, 2017:  Trump on Infrastructure (as reported by Politico):  “I’m not sure that we will bring [Democrats] in. I mean, maybe we’ll bring them in, maybe not. I think the infrastructure bill will be bipartisan. In fact, frankly, it may have more support from the Democrats. I want a very strong infrastructure bill.”
  • July 19, 2017:  The House Budget Committee reported a Budget Resolution that supports federal infrastructure investment only if it is “deficit-neutral” over the next 10 years – rejecting the longstanding governmental practice of issuing long-term bonds to finance capital investments.  If Congress rejects long-term bonds (deficit-financing) as a means of paying for long-term investments in our nation’s infrastructure, the state of U.S. infrastructure is likely to continue its rapid decline.   Language of the House Budget Resolution: “SEC. 402. RESERVE FUND FOR INVESTMENTS IN NATIONAL INFRASTRUCTURE. In the House of Representatives, the chair of the Committee on the Budget may adjust the allocations, aggregates, and other appropriate levels in this concurrent resolution for any bill or joint resolution, or amendment thereto or conference report thereon, that invests in national infrastructure to the extent that such measure is deficit neutral for the total of fiscal years 2018 through 2027.”  (emphasis added)  The rejection of deficit-financing suggests the unworkable principle that capital investments can only occur when long-term projects can be squeezed into annual operating budgets.
  • May 23, 2017:  The President’s FY 2018 Budget, released on May 23, 2017, asserted that “more Federal funding for infrastructure is not the solution,” despite the record of successful federal investments in the nation’s highways, waterways, and airports during the last century — beginning with the Eisenhower Administration’s historic investment in the national highway system.  The Budget proposes only $5 billion for infrastructure for FY 2018 and a 10-year investment of only $200 billion – a tiny fraction of the resources needed to meet the nation’s infrastructure deficit (as explained below).
  • March 9, 2017:  Quadrennial 2017 Infrastructure Report Card released by American Society of Civil Engineers giving the U.S. a cumulative grade of D+ and finding: ” We can no longer afford to defer investment in our nation’s infrastructure. To close the $2.0 trillion 10-year investment gap, meet future needs, and restore our global competitive advantage, we must increase investment from all levels of government and the private sector from 2.5% to 3.5% of U.S. Gross Domestic Product (GDP) by 2025. This investment must be consistently and wisely allocated, and must begin with the following steps:
    1. Put the “trust” back into “trust funds.” Dedicated public funding sources on the local, state, and federal levels need to be consistently and sufficiently funded from user-generated fees, with infrastructure trust funds never used to pay for or offset other parts of a budget.
    2. Fix the Highway Trust Fund by raising the federal motor fuel tax. To ensure long-term, sustainable funding for the federal surface transportation program the current user fee – 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel – must be raised by at least 25 cents per gallon and tied to inflation to restore its purchasing power, fill the funding deficit, and ensure reliable funding for the future.
    3. Authorize programs to improve specific categories of deficient infrastructure and support that commitment by fully funding them in an expedient, prioritized manner.
    4. Infrastructure owners and operators must charge, and Americans must be willing to pay, rates and fees that reflect the true cost of using, maintaining, and improving all infrastructure, including our water, waste, transportation, and energy services.”
  • March 1, 2017:  Nonpartisan Congressional Budget Office unveils a web-page for “Spending on Infrastructure and Investment”
  • Feb. 28, 2017:  In an address to a joint session of Congress, President calls for a $1 trillion investment in infrastructure.
  • Nov. 17, 2016:  Congressional Research Service Report:  Infrastructure Finance and Debt to Support Surface Transportation Investment

Resources and Reports

Financing Infrastructure

  • Excerpts from CRS Report Infrastructure Finance and Debt to Support Surface Transportation Investment
  • Investment in surface transportation infrastructure is funded mainly with current receipts from taxes, tolls, and fares, but it is financed by public-sector borrowing and, in some cases, private borrowing and private equity investment.
  • Financing is normally not arranged at the federal level, as the federal government builds few transportation projects directly.
  • This (CRS) Report discusses current federal programs that support the use of debt finance and private investment to build and rebuild highways and public transportation. It also considers legislative options intended to encourage greater infrastructure financing in the future.
  • The federal government’s largest source of support for surface transportation infrastructure is the Highway Trust Fund (HTF), which is funded principally by taxes on gasoline and diesel fuel. Funds from the HTF are distributed to state governments and local transit agencies for projects meeting federal standards.
  • State governments, local governments, and transit agencies must also contribute their own resources because grants from the HTF do not meet states’ entire surface transportation capital needs.
  • The federal government supports additional infrastructure spending by providing a tax exclusion for owners of municipal bonds, or “munis,” issued by state and local governments.
  • The federal government also supports project finance through loan programs, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and the Railroad Rehabilitation and Improvement Financing (RRIF) program, which can help leverage private investment via public-private partnerships (P3s), and through federally authorized state infrastructure banks (SIBs).
  • All of these financing mechanisms impact the federal budget, although none are as costly as federal grant funding.
  • With less federal support, financing places a greater burden on state and local governments to identify revenue sources to repay loans or to provide a return to private investors.
  • In many cases, non-federal revenue to finance a project is provided by a highway or bridge toll, but it could be a pledge of future sales tax or real estate tax revenue.
  • There are many legislative options that Congress might consider in modifying the federal role in surface transportation financing.
  • This (CRS) Report considers five:
    • Creation of a new type of bond offering federal tax credits to investors in infrastructure.
    • Changes to the TIFIA and RRIF programs.
    • Greater encouragement for P3s.
    • Creation of a national infrastructure bank to provide low-cost, long-term loans for infrastructure on flexible terms.
    • Enhancement of state infrastructure banks (SIBs) that already exist in many states, possibly with dedicated federal funding.

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