Transportation is the darling of US President Barack Obama’s $3.8 trillion fiscal 2013 budget proposal, as he beckons the private sector to invest in refurbishing the nation’s infrastructure.
Obama is calling for an historic $476 billion in recommended earmarks for this subsector of infrastructure over a six-year period and wants to invest the funds across surface transportation. This includes US highways, transit and rail – including inner-city passenger rail.
An immediate $50 billion is being proposed to address the nation’s “critical transportation infrastructure projects,” which, when combined with the former investment represents an 80 percent spike in the previous six-year bill on an inflation-adjusted basis, according to the budget proposal.
Additionally, President Obama has not backed down from the concept of a National Infrastructure Bank (NIB) – which would start with a $10 billion commitment from the federal government to kick-start loans and partnerships with private investors. According to the budget proposal, a NIB is prepared to finance up to half of total project costs.
The administration’s attention to infrastructure, particularly transport, was largely expected.
“Transportation infrastructure has been on life support for the past two years,” said Martin Klepper, the co-head of Energy and Infrastructure Projects Group at law firm Skadden. “I think we can follow the example of Europe and South America in bringing and attracting private capital to combine with an infrastructure bank to remove the burden on the federal government and greatly increase investment into [the industry].”
While the private sector is likely to be encouraged by the focus being placed on the sector – and while the industry, including Skadden’s Klepper, largely view an infrastructure bank as a ‘positive’ – no one appears to be sitting and waiting for the loans to begin.
“Local governments continue to identify and move forward projects that make sense to them. An infrastructure bank would be a source of capital for some of these projects, but even if the legislation passed tomorrow it would [still] take a while to set [it] up,” Klepper points out.
President Obama proposes redirecting funds that have been freed up as a consequence of troop withdrawals from the Middle East to the infrastructure sector as he seeks to eliminate gas tax preferences.