With the House of Representatives having approved a two-year budget in a 332-94 vote on December 13th, followed by the Senate’s 64-36 vote a week later, it seems that bipartisan compromise has not abandoned Capitol Hill altogether.
This bodes well not only for the US economy but also for the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act introduced by Senator Mark Warner, a Democrat from Virginia, in mid-November. The bill already has a bipartisan coalition of 10 Senators backing it, and that number is expected to grow.
“While Congress loves to fight Obamacare or any other issue in a ferocious way, when it comes to infrastructure financing, you really do see Congress trying to work together,” an industry insider commented.
For example, take the Federal Highway Administration’s Transportation Infrastructure Finance and Innovation Act (TIFIA). Not only was the original programme a success, but it also was vastly increased with the transportation reauthorization bill passed in 2012.
“The implicit message was strong,” Regina McElroy, head of TIFIA’s Office of Innovative Program Delivery, said at the CG/LA conference in late October, referring to the Moving Ahead for Progress in the 21st Century Act (MAP-21). The TIFIA programme, which first went into effect in 1998, was expanded from $1 billion to $17 billion, making it the largest public sector loan programme in the US. “The cornerstone of the programme since the beginning is to facilitate private involvement in transportation infrastructure,” she added.
The BRIDGE Act takes a similar approach but, in addition to transportation, is designed to also include projects in the water, wastewater and energy sectors. To encourage private sector involvement, the bill allows the public sector to invest no more than 49 percent of the cost of the project, “in order to avoid crowding out private capital,” according to an outline of the proposed legislation on Senator Warner’s website.
Private sector involvement is important not just because of the capital it makes available but more so because of the skills it brings to the table, as Emil Frankel, visiting scholar at the Bipartisan Policy Center, a non-profit think tank, pointed out during a recent Infrastructure Investor event.
The industry expert we spoke with readily agreed. “That’s exactly right,” he said. “The government’s capital is cheaper always – whether debt or equity – but what you want is the skill, not as hired guns but as people that have skin in the game.”
The bill calls for the creation of an Infrastructure Finance Authority (IFA), a government entity that would operate independently of any federal agency. It would be led by a chief executive and a board of seven voting members – both appointed by the President – but no more than four voting members can be from the same political party.
The IFA would receive initial funding of $10 billion from the government. This would serve as a loss loan reserve, but the aim is to ensure the entity becomes self-sustaining over time. This would be accomplished by establishing fees for loans or loan guarantees. These fees could be in the form of either application or transaction fees and could include interest rate premiums associated with the loan or loan guarantee.
The BRIDGE Act allows for a self-pay option, which as described above, means borrowers having to pay in order to use these products. “That has worked well in the case of US Ex-Im,” our source told II, referring to the US Export-Import Bank established by then-President Franklin Roosevelt in 1934, as part of his New Deal programme. “Since its initial capitalisation, Ex-Im has been steadily returning money to the government,” he said.
If Congress can finally agree on a budget and avoid another government shutdown then perhaps there is hope the BRIDGE Act might pass, proving once more that lawmakers can reach across the aisle – if they want to.