Bridging the political divide

The November US midterm elections gave Republicans control of both chambers of Congress for the first time since 2006 and the widest margin of control since 1929 according to the Washington Post. The implications are many and significant – first and foremost raising the question of how a Democratic President will govern during the remainder of his second term with a legislative branch in the hands of the opposing party.

“There’s no way of knowing what the dynamic between the President and the Republicans who control the re-organised Congress will be, but if they’re looking for areas of agreement on things that matter to them and matter to the country, infrastructure has to be on that list,” said David Narefsky, a partner at Mayer Brown, during a teleconference the law firm hosted to discuss the impact the elections will have on US infrastructure and the use of public-private partnerships (PPP; P3).

We would have to agree. When Congress was so deeply divided that government ground to a halt for 16 days last year, infrastructure highlighted its ability to cross party lines.

An example is the Water Reform & Development Act (WRDA), which an overwhelming majority in both the House and Senate passed in May. A comprehensive piece of legislation aimed at improving the country’s entire water sector infrastructure, it has been touted as the most policy- and reform-focused legislation of its kind in two decades.

Then there is the Highway Trust Fund, which was set to go bankrupt this past August and has been made solvent only until May 2015. Congress failed to come up with a longer-term solution but with the same party having the majority in both chambers, passage of major legislation is easier and therefore more likely.

In addition, “Republicans will be looking for something that they can do to show that they can govern and passing a major infrastructure bill, a surface transportation bill, is clearly the way to do it,” John Schmidt, another partner at Mayer Brown, stressed during the same call.

Schmidt believes there is every reason to expect continued support for the Transportation Finance and Innovation Act (TIFIA). This seems likely considering the TIFIA programme, which first went into effect in 1998, was drastically expanded from $1 billion to $17 billion, becoming the largest public sector loan programme in the US. What’s more, the Water Infrastructure Finance and Innovation Act (WIFIA), which is closely modeled on TIFIA, was included in WRDA.

As for the use of P3s, the partisan shift resulting from the elections is not expected to have a negative impact. While the two political parties may have differing views on the types and level of funding “everybody has recognised it’s never going to be enough; it’s not even close to being enough, therefore we ought to be supporting public-private partnerships,” Schmidt said.

How things evolve also comes down to relationships. A case in point is the reauthorisation of the Federal Aviation Administration (FAA) which was passed in 2012 after more than 20 extensions. At the time, Representative John Mica, who was chairman of the House Transportation and Infrastructure (T&I) Committee, had to work with Jay Rockefeller, who chaired the Senate Committee on Commerce, Science and Transportation. The relationship between the two was “absolutely toxic,” according to Schmidt.

‘More positive’

Since then, Representative Bill Shuster, who also happens to be the sponsor of WRDA, has taken over as chairman of the House T&I Committee. On the Senate side, John Thune will succeed Rockefeller once the latter retires in January. “The Shuster-Thune relationship will be more positive so I think the likelihood that Congress will pass FAA reauthorisation has gone way up,” Schmidt commented.

Shuster has already stated that he will seek a new FAA reauthorisation bill that is bold and transformational, not just an extension of the current legislation which expires next September. That could make things easier for airport privatisation in the US, but, only time will tell.

The jury is also out on whether President Barack Obama and a Republican-controlled Congress will be able to find common ground. “I’m eager to work with the new Congress to make the next two years as productive as possible,” Obama said the day after the elections. Hopefully, infrastructure was one of the subjects on his mind.