Lawmakers seeking private funds for major infrastructure

As Washington struggles to balance economic development with budgetary austerity, some lawmakers are coalescing behind plans to attract private funds for investment in major infrastructure projects with a minimum of public money involved.

Two bills focus on infrastructure-a priority of the president and, in rare concert, the business and labor communities as well. The proposals approach public project financing from different directions: investments and bond underwriting. But both rely on investors to fill the gap government can't, a big shift from the situation in 2009, when government funding was used to stimulate the economy as the private sector faltered.

Sens. John Kerry, D-Mass., Mark Warner, D-Va., and Kay Bailey Hutchison, R-Texas, announced legislation called the BUILD Act on Tuesday. Flanked by U.S. Chamber of Commerce President Tom Donohue and AFL-CIO President Richard Trumka, the lawmakers proposed creating a national infrastructure bank, the American Infrastructure Financing Authority, to provide loans and guarantees for major construction projects.

Meanwhile, Sen. Ron Wyden, D-Ore., hopes to introduce a bill within the next few weeks that would modify the expired Build America Bonds program, which created a class of subsidized municipal bonds. Wyden's plan to authorize Transportation and Regional Infrastructure Project (TRIP) bonds is being scored on its cost by the Joint Tax Committee as he seeks out allies on both sides of the aisle.

Both plans rely on private money to finance the bulk of large-scale public projects that would range from construction and improvement of highways, waterways, and bridges to rail and energy-grid upgrades. All of those are much needed, say proponents, who quote American Society of Civil Engineers estimates that projected infrastructure spending will fall $2.2 trillion short of what's needed to keep things in adequate condition over the next five years.

Infrastructure investments are job creators in the short-term-someone has to build all that stuff and provide the machines and raw materials required to do it-that also create long-term opportunities for economic growth. Kerry's office estimates that the economy loses $80 billion a year because of blackouts on overloaded power grids and traffic-related slowdowns.

These investments are one of the few issues on which business and labor increasingly see eye-to-eye. Trumka and Donohue, no close friends, frequently lobby for more attention to the issue.

The looming challenge, with House Republicans aiming to make deep and increasingly draconian cuts and Congress as a whole leery of large-scale spending projects, will be to find the money for these efforts.

The Obama administration's fiscal 2012 budget proposes a $556 billion highway plan, but does not specify a mechanism to fund it. The most obvious method would be an increase in the gas tax, but few lawmakers are likely to have the stomach for that with oil prices rising. House Republicans are setting their sights much lower, spending perhaps half of what the White House seeks.

With investment uncertain, public-private partnerships are the next alternative. To foster those, the Kerry-Hutchison bill's AIFA would be modeled on the Export-Import Bank, which provides loans to foreign entities to purchase American goods. AIFA would provide loans and guarantees for large energy, transportation, and water projects.

The Ex-Im Bank has been profitable for years, and lawmakers believe an infrastructure bank would eventually become self-sustaining after an initial tranche of $10 billion in public funding. Supporters say the bank could spur $320 billion to $640 billion in investment over the next decade, insisting that it would be governed by market discipline and, after its initial funding, wouldn't burden the federal balance sheet.

Wyden's proposal, meanwhile, is modeled after the bonds pioneered under the Recovery Act. The program would allow municipalities to issue bonds that return some of the states' interest payments as a tax credit, which would lower the cost of borrowing at a time when states are in desperate fiscal straits. The advantage over traditional tax-exempt municipal bonds is that these bonds would be taxable, which makes them appealing to a broad array of pension funds and other institutional investors that don't care about tax-exempt interest.

Although the original Build America Bonds were popular with municipalities and investors, Republicans criticized the program as lacking oversight, offering little to help to rural communities, and even as a form of bailout program. Wyden's office has worked to answer their concerns; his bill proposes more stringent management authorities and limits on what kind of projects could be funded through TRIP bonds.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.