Commentary on Debate: How to Fix America’s Infrastructure

Monday night’s presidential debate included some instructive moments even for their repetitiveness; other moments were mere distracting distortions.

We have been writing about the need to upgrade America’s infrastructure it seems almost weekly. But only tangentially was the issue raised during the debate. Donald Trump, among his bill of particulars defining the trouble the Obama administration has ushered in over the past eight years, mentioned the sorry state of U.S. airports and compared them unfavorably to similar facilities in Asia.

“Our airports are like from a third-world country. You land at LaGuardia, you land at Kennedy, you land at LAX, you land at Newark and you come in from Dubai and Qatar and you see these incredible — you come in from China — you see these incredible airports and you land — we’ve become a third-world country,” Trump observed.

As Kim Day, the CEO of Denver International Airport, noted in an Op-Ed forThe Denver Post on the 20th anniversary of the local airport’s opening: “DIA is an economic powerhouse for Colorado, growing its initial annual economic impact of $3.1 billion to an estimated $26.3 billion in 2013. The airport supports nearly 190,000 jobs, and is on track to be even more impactful in the years to come.”

It’s not a perfect picture, of course, as cost overruns for project expansions, including a new train station and a hotel, well illustrate.

Nevertheless, a decision made 27 years ago to spend more than $2 billion on a new airport — the only major new one built in the U.S. since 1974 — has helped diversify Colorado’s economy and spurred broader growth.

Airports are certainly one area in which we can use an upgrade. We also need more and newer bridges, roads, and tunnels. And we need to upgrade the electrical grid. And we need to improve and update our port facilities.

The problem with the United States’ infrastructure is much broader than failing airports and bridges. The nation’s roads are congested and full of potholes. In 2014, the typical urban commuter spent 42 hours stuck in traffic, up from 20 hours in 1984. Americans consumed over three billion gallons of gas as they sat in grid­lock for almost seven billion hours, at a cost of $160 billion in wasted fuel and time.

Hydration is absolutely essential, and yet we continue to ignore the state of the infrastructure that delivers it to us. In its 2013 Report Card for America’s Infrastructure, the American Society of Civil Engineers gave our “drinking water” assets a “D.”

According to Professor Robert Glennon of the University of Arizona:

Our water infrastructure consists of approximately 54,000 drinking water systems, with more than 700,000 miles of pipes, and 17,000 wastewater treatment plants, with an additional 800,000 miles of pipes. A 2012 report of the American Water Works Association concluded that more than a million miles of these pipes need repair or replacement. That’s why communities across the nation suffer 240,000 water main breaks per year. The major cause of pipe failure is age.

Disease and death follow from poorly conceived and maintained water infrastructure.

The root of the crisis is clear: the United States has underinvested in its infrastructure. The federal gas tax is the main source of federal funding for roads, bridges, and subways. But Washington has not increased that tax, of 18.4 cents per gallon, since 1993; in real terms, its value has thus fallen by over 40 percent. Expert groups such as the American Society of Civil Engineers, business associations such as the U.S. Chamber of Commerce, and unions such as the AFL-CIO have all called for trillions of dollars of new investment. But Washington has failed to act.

The problems that plague American infrastructure are deep-seated and complex. Yet there is a way out. Washington and the public must recognize that world-class infrastructure does not come cheap. High-quality infrastructure is vital to global economic competitiveness, and the United States is falling behind. The United States invests less than two percent of its GDP in infrastructure; Europe, by contrast, invests five per­cent. Furthermore, the bureaucratic system that oversees public infrastructure spending has become hopelessly “siloed,” with separate agencies at each level of government dedicated to different modes of transport. Each has its own stakeholders, champions, and opponents. It’s a wasteful, inefficient system. Henry Petroski, a professor of civil engineering and history at Duke University in his book “The Road Taken”, claims reforming it will require several steps.

Firstly, governments should eliminate silos. A unified department should merge the federal highway, transit, aviation, maritime, and railroad administrations; the Army Corps of Engineers, which controls investment in ports; and the Environmental Protection Agency’s water programs, which provide federal funding for sewer systems and drinking water. This unified department of infrastructure should incentivize state and local authorities to make smarter choices with federal funding. For instance, it could coordinate the timing of different projects, such as a sewer-line expansion and a road repair, so that the government has to dig only once. It should also consider instituting a so-called corridor-based approach, similar to the one the United Kingdom uses, in which the government evaluates a set of projects designed to solve a particular problem and chooses the most cost effective among them. For example, to improve the flow of people between Washington, D.C., and New York City, policymakers should compare the costs and benefits of investing in highways, high-speed rail, increased airport capacity, and more efficient freight rail and shipping to decide how best to solve the problem, rather than doling out funds to each of the various transportation agencies without coordination.

The United States has reached a fork in the road. It can let its infrastructure crumble, its bridges collapse, and its roads grow ever more congested. While Government at all levels has a tenuous debt-and-deficit situation, government entities can nevertheless also borrow at historically low rates. It makes sense accordingly to lock in cheap money to pay for infrastructure investments with long economic tails. Finally, policymakers should not fear the private sector. Good ideas frequently come from sources outside the government. Cities and states should allow both the public and the private sectors to submit unsolicited proposals for innovative infrastructure projects. Of course, these projects would have to be rigorously and publicly evaluated. But the fact that private companies are motivated by profit is no reason for the government to ignore them.

City Should Consider Using P3s to Bolster Pension Plan and Water System, Observer Says

Last week we wrote that Municipalities’ should Consider Using P3s to Bolster Pension Plans and Water Systems. Lewis Solomon, a professor emeritus at George Washington University Law School in an Aug. 8 Herald Tribune op-ed. says P3s can produce revenues that could keep municipal pension plans solvent.

A solid pension plan should be 80 percent to 90 percent funded but Sarasota Florida’s general plan is only 71 percent funded and is projected to incur a $54 million unfunded liability in the years ahead, wrote Solomon.

To keep its underfunded pension plan afloat, the city is reducing cost-of-living adjustments and other plan benefits and limiting the number of workers who can enroll. The city should instead consider investing the plan’s funds in a P3 project that can serve the dual purpose of producing good returns for the plan while rehabilitating Sarasota’s struggling water and wastewater system, Solomon suggested.

“Rather than these palliatives, Sarasota could monetize its water and sewer system by entering into a public-private partnership for these assets. By providing access to private capital, this approach would quickly help the municipality achieve the general plan’s 80 percent funding target and substantially lessen the millions in current, annual contributions to pay down the plan’s unfunded liabilities,” he wrote.

Robert Poole of the Reason Foundation recently made a similar suggestion, pointing out that pension funds looking for relatively safe investments would do well to consider buying into existing or “brownfield” infrastructure P3 projects than in new “greenfield” ones.

By leasing its water system — representing more than $100 million in water and sewer projects — to a private developer for 20 to 30 years, Sarasota could obtain private financing for and rehabilitation of 175 miles of water pipes and its deteriorating lift stations, Solomon estimated.

More than 2,000 communities use P3s to fund and conduct vital water-related infrastructure projects, Michael Deane, executive director of the National Association of Water Companies has noted.

One example is the Bayonne (N.J.) Municipal Utilities Authority, which leased its ailing water and wastewater system to Kohlberg Kravis Roberts and United Water in 2012 for 40 years, Solomon pointed out. Through the deal, the authority received $150 million from the developer, which also agreed to invest $107 million in the city’s water system and provide technical expertise to rehabilitate it.

“This infusion of capital was critically important to the city because it eliminated $130 million of existing debt and improved both the authority’s finances and Bayonne’s credit rating,” according to a June 10, 2015, article on two successful municipal water P3s published by the Wharton School at the University of Pennsylvania.

Although it is not yet common for pension plans in this country to invest in public infrastructure projects, interest is growing. For instance, the California Public Employees Retirement System announced recently its purchase of a 10 percent share — at least $330 million — of the company that operates and maintains the Indiana Toll Road.

Pension fund managers in Canada have figured this out. Several are invested in such projects internationally and the Trudeau government is encouraging them to do so domestically.

Advantages and Disadvantages of Public Private Partnerships

Advantages and Disadvantages of Public Private Partnerships

There are many advantages and disadvantages of public private partnerships that should be considered before entering such a co- venture. A public private partnership refers to a venture in which funding and operations are run by a government agency or authority and a private sector entity. Over the years, public private partnerships have become increasingly popular internationally.

Public private partnerships are common in different areas including, infrastructure, transportation and gas and oil exploration.

Today, governments at all levels are faced with budgetary constraints yet the public needs them to deliver certain services.  Simply put, partnerships between the public and private sectors are critical in ensuring that a country develops economically.

One of the major advantages of public partnership is efficient management. Efficiency is very important in the management of developmental projects. This is achieved when the public sector and private company work together on a project. Plans as well as strategies are formulated and implemented more efficiently.

Another advantage of public private partnership is the improvement of the quality of the end results of a project. Partnership between a public agency and a private company brings technological advancement. This provides the necessary solutions for the completion of a project. Many private companies have highly advanced technology. When the government partners with such companies technology that is needed to deliver quality results is achieved.

The speed with which projects are executed is also enhanced due to the combined efforts of the government agency and the private company. In addition, the cost of accomplishing developmental projects is reduced through public private partnership. Both the government and the private company provide the necessary capital for development projects.

Nevertheless, there are drawbacks or disadvantages of public private partnerships as well. The difference in the work culture is one of the disadvantages of this venture. Differences in the functioning of a government agency and the private sector company can cause problems in the execution of the project.

Changes in government policies, often caused by changes in the electoral make up,  can also affect the model of the public private partnership. Such changes can affect capital flow or direction to favor the government leading to losses for a private company. This is one of the reasons why some companies fear to get into public private partnerships.

Mismanagement of the project is another disadvantage of a public private partnership. Mismanagement of the involved project is always a threat to the programs that are undertaken by the private and public sector. This is caused by unanticipated or unplanned challenges that lead to loss of resources that can benefit the government.

New Jersey Transportation Funding- key elements of Senate bill.

The New Jersey state Senate adjourned on Monday before considering any proposals related to renewing transportation funding or cutting taxes. But the Senate is back in session tomorrow, setting the stage for what is expected to be another long day of negotiations.

At the heart of a new bill that was  passed by the state Assembly early Tuesday morning  is a proposed 1 percent reduction of New Jersey’s 7 percent sales tax.The cut would be phased in, starting at 0.5 percent next year and reaching the full 1 percent in 2018. It would come as part of a broader deal to renew the state Transportation Trust Fund (TTF) for another 8 years with a 23-cent gas tax hike.

The proposal featuring the sales-tax cut that has emerged this week actually is an alternative to another bipartisan plan that came out of the state Senate earlier this month.

That plan, sponsored by Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex), also features a 23-cent gas-tax hike, but instead of a sales-tax cut it calls for phasing out New Jersey’s estate tax and making a series of other tax cuts. They include lifting state income-tax exemptions on pensions, 401(k) plans, and other sources of retirement income over the course of several years. The Sarlo-Oroho plan would cost an estimated $870 million once all the cuts were fully implemented.

The new proposal, backed by Governor Christie and Assembly Speaker Vince Prieto (D-Hudson), scraps most of the tax cuts that are included in the Sarlo-Oroho plan in exchange for the sales-tax reduction. It does, however, keep changes to retirement-income exemptions that the two senators proposed, adding another $200 million to the potential cost of the Christie-Prieto plan.

The Senate has yet to consider the proposal, but if it were to be enacted, the sales-tax cut would represent New Jersey’s first reduction of a broad-based tax since 1994. It would also come at a time when the state has been experiencing revenue problems, including a $600 million budget hole that had to be closed with a series of cuts and other adjustments just last month.

The budget impact of the proposed sales-tax cut would start out modestly at $376 million during the 2017 fiscal year. And because it is part of a broader plan that involves the gas-tax increase to shore up the TTF, the cut would initially free up roughly $350 million in sales-tax revenue that’s currently being used to prop up the deeply indebted trust fund.

Going forward, the impact of the sales-tax cut on the budget would rise to an estimated $1.6 billion once fully phased in during the 2019 fiscal year, according to the nonpartisan Office of Legislative Services. Because all of the more than $1 billion in annual revenue that would come in from the 23-cent gas-tax hike would be constitutionally dedicated to funding transportation projects,  the sales tax cut  would not be offset, leaving a gap on the state budget.

Supporters predict that gap would be closed by economic growth, but if that growth doesn’t materialize, the hole would have to be filled with spending cuts or other tax hikes since the state constitution requires a balanced budget.

Complicating the issue even further is a planned constitutional amendment, backed by Democratic legislative leaders and public-worker unions, that call’s for revenue growth to help fund a series of ramped-up state contributions to the presently underfunded public-employee pension system. If voters approve the amendment this fall, it would mandate spending on the pension payments to increase from $1.3 billion this fiscal year to over $3 billion just as the full impact of the sales tax-cut would take effect.

New Jersey’s sales tax is rooted in a 1966 law that established a 3 percent rate. That was increased to 5 percent in 1970, and to 6 percent in 1983. The rate was lifted to 7 percent in 1990 under then-Democratic Gov. Jim Florio, only to be reversed in a backlash in 1992.

Another increase restored the rate to 7 percent in 2006 under then-Democratic Gov. Jon Corzine, but only after a six-day shutdown of state government. At the same time, the range of services that are subject to the sales tax was expanded, though New Jersey still offers exemptions for clothing, groceries and necessities.

Unlike many other states, New Jersey does not allow sales taxes to be levied at the local level. In fact, specially designated Urban Enterprise Zones allow many struggling urban areas to charge a lesser rate of 3.5 percent.

Notably, sales tax collections have been on the rise; while income tax is subject to significant volatility, the sales tax has been a steady performer for the state budget over the last several years. It generated $7.5 billion in revenue during the 2010 fiscal year, and $7.8 billion during the 2011 fiscal year. Sales tax collections then steadily improved from $8 billion during the 2012 fiscal year to $8.8 billion through the 2015 fiscal year. The latest projection for the current fiscal year, which ends at midnight tomorrow, is for $9.3 billion, and Christie’s administration is forecasting a $9.6 billion haul during the 2017 fiscal year.

New Jersey Legislative Leadership Split Over Revenue Sources for Transportation Trust Fund

New Jersey is already one the nation’s most indebted states, ranking third behind only California and New York when it comes to net tax-supported debt, according to the latest version of the annual state debt report, which was released last year. And borrowing has gone up by roughly 50 percent in just the past decade.

Legislative leaders, nevertheless,  say they are close to reaching final agreement on a package whose key components will include as much as $2 billion in combined annual revenue from borrowing and a likely increase in state fuel taxes to support transportation funding. New Jersey needs a new plan for funding transportation projects in place by the middle of 2016.

Still Senate President Stephen Sweeney (D-Gloucester) and Assembly Speaker Vince Prieto (D-Hudson)  disagree over how much money should come from borrowing, how much from ‘pay as you go’ sources like higher taxes at the gas pump. In fact, determining exactly what share of the new funds should be generated from borrowing versus more readily available sources like taxes — what’s known as “pay-go” in public-finance circles — may well be the final sticking point.

“We have to start being mindful of that,” Assembly Speaker Vince Prieto (D-Hudson) said yesterday in an interview with NJ Spotlight. Prieto said he’s been advocating for a robust pay-go component in the next long-term transportation-spending plan to ease the heavy reliance on borrowing. (Credit AP).

“It’s got to be a good balance,” he said. “I think that’s the key.” (Credit AP).

But Senate President Stephen Sweeney (D-Gloucester) maintains that not all borrowing is bad.

That’s especially true when the project being funded is going to last for several decades, like a new bridge, he explained to observers in Trenton on Monday .

The problem with prior state transportation-spending plans is not that they used borrowing, but abused best borrowing practices, Sweeney said. For example, rather than hike the gas tax, which hasn’t been increased in more than two decades, former Gov. Jon Corzine and others simply refinanced debt for longer terms, adding more costs in the long run.

“What got screwed up here is they kept refinancing the money,” he said. (Credit AP).

Sweeney also talked about striking “a balance” between borrowing and pay-go financing, saying once he and Prieto can reach an agreement on that issue, many others, including how much state gas taxes will need to be increased to fund the new plan, should be resolved.

The outcome of their deliberations will be important for New Jersey motorists who are concerned about a gas-tax increase since every dollar that isn’t raised for new transportation projects from borrowing will likely need to be generated at the pump. Likewise, for state taxpayers concerned about the bottom line, taking on too much new borrowing could threaten New Jersey’s already weakend bond rating, thus adding to the costs the state incurs whenever it needs to generate revenue from bond sales.

Finding the right balance between pay-go and borrowing, according to transportation experts, is also an important factor for the government officials who are tasked on a daily basis with managing the projects funded by the state.

Right now, the state is relying heavily on revenue generated by taxes levied on gasoline purchases and the gross receipts of refineries and distributors to pay for transportation projects and to generate federal matching funds. Together, those two taxes total 14.5 cents for every gallon purchased. Funds from state highway tolls and the Port Authority have also been used in recent years to subsidize the trust fund.

But thanks to the heavy amount of borrowing for transportation that’s occurred in past years, all of the revenue that’s being raised by the gas taxes will have to be used to pay down the trust fund’s significant debt as of July 1, leaving no cash for new projects unless there’s an increase.

Christie authored the state’s latest long-term transportation-spending scheme, a five-year plan that will expire this year at the end of June. And when Christie rolled out that initiative back in 2011, he said it would allow for nearly $2 billion of the overall $8 billion in spending over the five-year term to be financed with pay-go revenue out of the annual state budget.

Doing so would also mean other states would be “looking at New Jersey as the model for restoring a state to fiscal health,” he said at the time.

But Christie never funded the broader pay-go goals that were included in his original transportation-spending plan, except for an initial $76 million contribution in the first year. To make it through the final year of his plan this year, when pay-go financing would have totaled more than $600 million, Christie’s administration is instead relying on draining of $281 million in cash balances, the repayment of a $241.5 million loan to New Jersey Transit, and another $627 million in new borrowing.

With Governor Christie now focusing much of his time in recent months on his bid for the White House, this time the legislative leaders have taken it upon themselves to craft the next transportation-spending plan. Nevertheless, Sweeney and Prieto know that any agreement they reach can hardly be considered a done deal. The proposal will ultimately go to Gov. Chris Christie, who has final say. Both legislative leaders say they also have to keep in mind that Christie is not likely to look favorably upon a big tax-hike proposal in the middle of a GOP presidential primary.

Why the FAST Act Will Benefit Public-Private Partnership

Congress has passed, and the president has signed, a long-term surface transportation reauthorization bill, (America’s Surface Transportation Act (FAST Act), H.R. 22) providing approximately $305 billion of funding for highway and transit projects over the next five years and revising federal transportation policy on a number of important topics-including public-private partnership market.

The Highway Trust Fund

The Highway Trust Fund, supported largely through user fees by way of federal gas tax revenues, serves as the primary mechanism for states to fund road and transit construction and maintenance projects. The Highway Trust Fund has a growing gap between revenue and expenditures because the federal gas tax rate has not been raised since 1993 and is not indexed to inflation, while the cost of maintaining and improving U.S. surface transportation infrastructure continues to rise and increasingly fuel-efficient cars use fewer gallons of gas per mile traveled.

The FAST Act generally maintains the existing federal transportation funding model — distributing more than 90 percent of federal funding to state departments of transportation through formulas — while boosting highway spending by about 15 percent over existing levels, and increasing transit spending by about 18 percent. After dozens of recent short-term patches of the Highway Trust Fund through transfers from the general revenue fund, the FAST Act closes a five-year, roughly $70 billion gap through creative one-time budget mechanisms such as transfers from Federal Reserve accounts and the sale of oil from the Strategic Petroleum Reserve.

While state departments of transportation have praised the predictability of the FAST Act, the modest increase in overall spending levels will not fully address the looming U.S. infrastructure backlog. For example, the American Society of Civil Engineers estimates that the U.S. needs to invest approximately $1.8 trillion in surface transportation projects by 2020 to maintain a state of good repair. Additionally, the FAST Act does not provide a long-term sustainable solution (such as a gas tax rise or a vehicle miles traveled fee) for fully funding the Highway Trust Fund beyond the act’s five-year term.

Public-Private Partnerships and Innovative Financing

Previously, states relied almost exclusively on Highway Trust Fund transfers, state gas tax revenue and municipal bonds to fund new projects, delivering such projects through a design-bid-build model whereby the state department of transportation developed design specifications then solicited the lowest bid for the construction of a project. In an effort to improve mobility and build new highway and transit capacity in a funding-constrained environment, U.S. states have increasingly turned to public-private partnership (P3) delivery models that include project risk transfer from states to private entities, efficient and integrated delivery of design, construction and maintenance project components, and an infusion of upfront private equity. U.S. states are also using more project-based revenue sources, such as user fees and tolls, and innovative federal finance tools such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) federal credit program and private activity bonds.

On balance, by providing a relatively stable but still under-funded federal revenue stream, the FAST Act is largely positive for the continued use of the P3 delivery model by U.S. states. The FAST Act will end much of the short-term funding uncertainty that caused states to postpone or cancel projects during prior weeks- or months-long Highway Trust Fund patches, but the lack of fully realized surface transportation funding will encourage states to continue to seek project delivery efficiencies and private funding sources through P3s.

Toll Policy

The FAST Act takes a mixed approach toward federal tolling policy. User fees, usually in the form of tolls for highway projects, are often essential elements of the funding and financing package for P3 projects. While federal law only allows tolling on interstate highways where additional lanes are constructed, the Interstate System Reconstruction & Rehabilitation Pilot Program allows three states to experiment with tolling existing interstate highways. Created in 1998, the pilot program has long been fully subscribed, but the three participating states (Virginia, Missouri and North Carolina) have not yet implemented any tolling of existing facilities under the program. While P3 and tolling proponents had urged Congress to expand the number of slots in the pilot program, the FAST Act instead encourages the existing participants to expedite their projects, requiring the three existing states to move forward with a tolling project within one year (with a potential one-year extension). If the participants fail to comply, their slot will expire and other states will be eligible. The FAST Act also requires new states to have legislative authority to implement the tolling of an existing facility, and any new participants must complete their projects within three years.

TIFIA Funding Levels and Policy Tweaks

The FAST Act reduces funding levels for the TIFIA program (utilized by many P3 projects) from $1 billion over the last two years to $275 million in FY 2016, rising to $300 million for FY 2019 and FY 2020. However, TIFIA had not made full use of its authorized funds in the last two years, causing $639 million in TIFIA funds to be transferred back to the Highway Trust Fund in 2015. The FAST Act eliminates the requirement that the TIFIA program transfer such uncommitted balances.

While the TIFIA funding cut is not ideal, it should not have an acutely adverse effect on P3 projects due to the lack of market support over the last two years for the $1 billion annual level and the steady increases in funding over the five-year life of the FAST Act. The FAST Act also allows states to use an increasing array of funding sources to pay the subsidy and administrative costs associated with TIFIA credit assistance, expands eligibility to include smaller projects and transit-oriented development projects, creates a streamlined process for TIFIA loans under $100 million, and increases funding levels for the U.S. Department of Transportation’s administration of the program. Additionally, the FAST Act codifies existing DOT practice by allowing costs related to P3 projects using an availability payment concession model to be eligible for federal reimbursement.

WIFIA Fix

The FAST Act fixes a widely criticized element of the Water Infrastructure Finance and Innovation Act (WIFIA) program introduced in 2014 by eliminating a prohibition on financing water infrastructure improvements with financing packages that include both WIFIA loans and tax-exempt debt such as municipal bonds.

Innovative Finance Bureau and Investment Center

The FAST Act also establishes a National Surface Transportation and Innovative Finance Bureau within the DOT, which is intended to serve as a “one-stop-shop” for states and local governments to receive federal financing or funding assistance, as well as technical assistance. The nascent Build America Transportation Investment Center introduced this year by the Obama administration appears to have an overlapping mandate, and it remains to be seen how these two entities will interact. While the bureau and center may not provide enormous benefits for state departments of transportation with extensive P3 experience, their existence reflects a general positive attitude of Congress and the administration toward P3s and innovative finance.

Nationally Significant Freight and Highway Projects Program

The FAST Act creates a new grant program, the Nationally Significant Freight and Highway Projects Program, funded at $4.5 billion over five years, for “nationally significant” projects costing more than $100 million that improve the movement of both freight and people, increase competitiveness, reduce bottlenecks, and improve intermodal tansportation. The DOT will award projects competitively based on statutory criteria, similar to the popular existing “TIGER” competitive grant program administered by the DOT. The FAST Act limits the federal share of project costs to 60 percent, and only $500 million of the $4.5 billion can be awarded to freight rail and freight intermodal projects.

Long-Distance Intercity Passenger Rail Routes

In addition to the highway and transit provisions, the FAST Act contains a passenger rail title that reauthorizes and funds Amtrak intercity passenger rail operations for a five-year period. Included among the passenger rail policy prescriptions is a new pilot program that would allow a public entity (such as a state or a joint powers authority) or a private rail carrier to bid to operate up to three long-distance (more than 750 miles) passenger rail routes that are currently run by Amtrak. While Amtrak turns a profit on its heavily used Northeast Corridor service, many of Amtrak’s long-distance routes are unprofitable.

Bill Would Leverage P3s to Boost Infrastructure Funding

Legislation introduced in the Senate yesterday would bring billions of dollars of investment to state and local governments to help grow and repair America’s aging infrastructure. Sens. John Hoeven (R-ND) and Ron Wyden (D-OR) introduced the Move America Act, which would expand tax-exempt private activity bonds and create a new infrastructure tax credit, giving states significant flexibility to pursue much-needed infrastructure projects. The Move America program is designed to leverage additional private investment in our public infrastructure, according to KTVZ-TV.

The legislation would create Move America Bonds, which would expand tax-exempt financing for public-private partnerships, and Move America Credits, which would leverage additional private equity investment at a lower cost for states. Through cheaper and more flexible access to debt and equity, Move America gives states the tools they need to expand investment in roads, bridges, ports, rail, and airports.

“Move America bonds and tax credits are an effective way to leverage private-sector dollars to build the infrastructure we need across the country to grow America’s economy and create jobs,” Hoeven said. “We have bipartisan support for this effort and seek to do it in a way that incentivizes private investment, leverages the P3 program and is fully paid for so that it doesn’t increase the deficit.” (Credit KTVZ-TV).

To address the national infrastructure investment gap, the senators said it is important to ensure the solvency of the trust funds for highways, airports, ports and waterways, but it is also vital that the federal government do what it can to leverage greater private investment in infrastructure.

Greater use of private capital through P3s could serve as a helpful addition to increased federal infrastructure spending through the infrastructure trust funds, they said. P3s provide two major benefits: the private investment provides an injection of upfront capital financing, and the risk-transfer to private parties can bring increased efficiency to the design, construction and maintenance process.

While not all projects are feasible for P3s, they can play a helpful, additive role for public infrastructure, in concert with robust public funding, the lawmakers said.