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#TimetoBuild: A bipartisan way forward on infrastructure investment

Infrastructure investment resonates with voters because they appreciate the fact that this investment creates jobs, boosts the economy and improves our quality of life. That support cuts across partisan lines. In a 2017 Gallup poll, 69% of Americans indicated that infrastructure investment should be a top priority for Washington.

Yet it appears at least parts of the Administration’s plan for major investment in U.S. infrastructure, a linchpin issue in the president’s 2016 election, is on hold. It’s reported that Congress doesn’t expect to tackle infrastructure before next year, after the mid-term elections, though the omnibus did include $20 billion in additional money for existing infrastructure programs. Also, there’s an expectation that Congress will pass the FAA bill this year, including Airport Improvement Program authorization.

That’s unfortunate, because it means another lost year in which vital national needs are not being met. But while the failure to advance infrastructure spending this year is a disappointment, it’s not a catastrophe—as long as policymakers work to build a bipartisan consensus for action soon.

Given the longstanding gridlock in the nation’s capital, that sounds like a tall order. But some infrastructure advocates haven’t given up on the possibilities for workable agreement.

Among those advocates are infrastructure policy experts Chris Hamel, a retired RBC Capital Markets executive and a former chair of the SIFMA Infrastructure Policy Committee, and Kenneth Hiteshew, senior fellow at New York University’s Marron Institute for Urban Management.

In a recent opinion article for Governing Magazine, Hamel and Hiteshew urge policymakers to look more closely at the Administration’s infrastructure plan as a starting point for thinking through the challenges. They argue the Administration’s outline has bipartisan appeal, since it is a “logical extension of the Obama administration’s policy of encouraging greater private investment in public infrastructure.”

The key to better infrastructure investment, Hamel and Hiteshew note, is to “Invest more wisely.” That means recognizing that in a time of limited public budgets at the federal, state and local levels, officials need to find creative approaches to get more value out of every infrastructure dollar.

While Hamel and Hiteshew offer measured critique of the Administration’s outline, they also point toward the plan’s strengths as a blueprint for guiding smarter infrastructure investment that gets more bang for the buck. That starts with improving procurement and financing processes to achieve greater discipline and efficiency in both the planning and construction phases:

Such private-sector efficiencies in the provision of public infrastructure are commonplace in other western economies, such as Australia, Britain and Canada. One barrier to replicating this approach in the U.S. has been the availability of tax-exempt municipal bonds, which allow state and local governments to borrow at lower cost compared to higher-cost private-sector debt and equity. 

The Trump plan smartly addresses this issue by expanding the use of “private activity bonds” that allow a similar financing tool for public-private partnerships (P3s). Making the private sector eligible for this form of tax-exempt financing would level the “cost of capital” playing field and free governors and mayors to select the most efficient delivery and operating approach for each project.

The key, they suggest, is to create more incentives for private investment models that go beyond the “long-established governmental-monopoly model that dominates the financing and delivery of U.S. infrastructure.” Project Invested has explored similar ideas on how to improve infrastructure financing in a previous article.

A more decentralized model of financing and planning, with private sector investors working closely with state and local governments, is likely to serve the nation’s infrastructure needs more effectively and efficiently in the long-term. But while state and local governments will play a critical role, Congressional action and federal funding are necessary to give that innovative process the momentum it needs.

Meanwhile, in the absence of action from Congress, the condition of the U.S. infrastructure system only continues to deteriorate. A 2017 report by the American Society of Civil Engineers (ASCE), the 2017 Infrastructure Report Card, assessed the state of U.S. infrastructure and gave an across-the-board grade of “D+”. The report also estimated that roughly $2 trillion in federal and state investment is needed over the next ten years—or about $206 billion per year—to boost that grade to an acceptable level. Failure to act means that the cost only grows higher with each passing year, while thousands of jobs are lost.

“In infrastructure, you get what you pay for and for decades we haven’t been paying nearly enough,” the ASCE report says. “It’s time to change that, not in one-time, short-term patches and small-scale investment increases, but through bold leadership, thoughtful planning, and—most importantly—sustained strategic investment. Through such transformative action, our infrastructure will be improved and built for the future.”

The case for action is clear: infrastructure investment should be a priority now. There’s powerful bipartisan public support for that investment. There exists a viable blueprint that could serve as a starting point for legislative deliberation on this matter of vital national interest. Getting infrastructure right will demonstrate to the American people that their leaders in the nation’s capital still know how to get results.

There’s no excuse for further delays—it’s time for Washington to build.

Further reading: 

Get moving: Why Washington needs to tackle infrastructure investment 

What’s needed to address the infrastructure deficit 

How to solve America’s infrastructure problem

 

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