After a long wait, Congress now has an extensive infrastructure proposal from the President on their desk to review. The passage of this administration’s infrastructure playbook to Congress kicks off the process in Washington to develop a bipartisan deal that could ramp up the federal partnership in infrastructure investment.
For city officials, who have been talking to the White House and Congress throughout the past year about moving this top priority for cities forward, the proposal is welcome news.
The President has asked Congress to “act soon” on an infrastructure bill that will:
- Stimulate at least $1.5 trillion in new investment over the next 10 years,
- Shorten the process for approving projects to 2 years or less,
- Address unmet rural infrastructure needs, empower state and local authorities, and
- Train the American workforce of the future.
The infrastructure proposal’s main policy themes center around two questions: How can every federal dollar be leveraged, and what efficiency can be found in the process?
In the proposal, there are many shared goals with our cities’ guiding principles for rebuilding and reimagining America’s infrastructure. Bringing federal partnership to more locally-driven projects, building a trained workforce, and reaching rural America with more investment are just a few key areas where the proposal indicates America’s federal-city partnership could improve substantially.
But the devil is in the dollars and the details when it comes to infrastructure, and there are many ideas that need to be worked out as Congress considers what a bipartisan infrastructure package could look like.
Incentivize Actions That Can Be Taken
The majority of the president’s proposal relies on a $100 billion incentives program. That program would incentivize cities and states to set up long-term funding for infrastructure investments, using public or private revenue streams, in order to receive an incentive grant of no more than 20% of the project.
The challenge is that not all cities have the ability to set up revenue streams — nor can those streams cover 80+% of every project. In fact, cities are missing many tools in their infrastructure revenue toolbox. In 47 states, local governments face limitations on how they raise funds for infrastructure.
States could choose to remove these barriers, but with the majority of the funding working off a flawed premise, this should give Congress pause.
Give Full Credit for Stepping Up
The funding for the majority of the nation’s transportation infrastructure comes from a few cents collected every time a car puts a gallon of gas in the tank. But Congress has not raised the gas tax since 1993 — even just to keep pace with inflation. Meanwhile, cities and states have gone to great lengths to invest and make the case to citizens that good infrastructure is worth the cost.
Since 2012, more than half of states have raised gas taxes slightly to pick up the slack. At the same time, a stream of cities have used sales taxes and other measures to keep up with infrastructure needs and growth.
In the proposed incentives program, the credit a city or state would get from delivering new revenue would only be counted significantly if it were set up in the last three years. If the federal government can wait 25 years to figure out they need to invest more in infrastructure, perhaps they should give cities and states a bit more credit for stepping up.
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Fiddling with Financing Without Funding
The president’s proposal would give infrastructure financing programs $20 billion. These include increasing the capacity of existing federal credit programs to fund investments, and broadening the use of private activity bonds (PABs). Expanding the eligibility of these programs like the Transportation Infrastructure Finance and Innovation Act (TIFIA) and the Water Infrastructure Finance and Innovation Act (WIFIA) could be a very viable path forward to meet some additional needs.
However, in some years existing TIFIA dollars have not been fully used up — largely because the number of projects that can afford the financing is limited. States and cities can only borrow so much to finance infrastructure.
Over a ten-year period, cities and states have put out an impressive $3.8 trillion in municipal bonds, all of which they are committed to pay back over time. While fiddling with the financing can help, the most pressing question for Congress will be how much funding is fiscally responsible versus how much financing.
The White House’s proposal will hopefully start a domino effect in Washington for Congress to pull together a bipartisan bill that works with cities to rebuild America’s infrastructure. Cities have put out our guiding principles for an infrastructure package along with specific program recommendations for Congress to consider.
We believe that now is the right time for Congress to join cities in rebuilding core infrastructure that delivers the services Americans want and our economy needs. We remain hopeful that Congress will rebuild with us and plan to remain active participants in this effort.
About the Author: Brittney Kohler is NLC’s Program Director for Transportation and Infrastructure.