With just two weeks left until the coffers of the Highway Trust Fund are fully depleted, Washington, DC is again turning its earnest attention to the question of transportation funding.
In a discussion with Move America Act authors and senators Ron Wyden (D-OR) and John Hoeven (R-ND) at the Bipartisan Policy Center, as part of the Executive Council on Infrastructure series moderated by BPC vice president of communications Robert Traynham, some possible scenarios were brought to light.
“I think the likelihood is that we will probably see an extension to the end of the year,” Hoeven said. “If we end up doing a bill before we leave at the end of this month, I think it's more likely going to be a two-year bill with pay-fors cobbled together very similarly to what we did two years ago.”
Traynham, who seemed a little unsatisfied with this answer, replied: “The analogy I would use is, perhaps if this gets extended another year or so forth, it's like a Band-Aid on a skull fracture.” He asked the senators: “Why is it so difficult for you and your colleagues to come together with the same set of facts and come to a realistic solution?”
What the senators then said was in line with what has been reported multiple times: namely, all agree that infrastructure funding is crucial, but there is a sharp divide when it comes to the question of how to pay for it.
Hoeven, who formerly served as governor in his state, said that he does not support the effort to raise the gas tax, and that the voters in his state stand against that plan as well, since they feel they are disproportionately affected by higher fuel costs.
“I think it is going to be very difficult to get votes to raise the gas tax. Even though repatriation is more complicated, I think you can get the votes to do it,” Hoeven said.
Even with a long-term transportation funding package in place, the US faces a serious infrastructure deficit. The American Society of Civil Engineers estimated in its latest report that the US needs to spend $3.6 trillion by 2020 to bring its infrastructure up to a “B” grade, and said it is unlikely that the government will spend more than $1.6 trillion during this period unless new funding streams are formed.
Likewise, though more conservatively, the BPC estimates the infrastructure gap to be roughly $1 trillion. With that in mind, Wyden and Hoeven drafted the Move America Act (MAA), which Wyden described as an updated take on the Build America Bonds he championed just over a decade ago.
“I was the principal author of Build America Bonds, which sold $188 billion in a year and a half. I learned a lot from that; conservatives had concerns that it had too big a role for the federal government,” Wyden said. “What John and I have done, I believe, is offered an alternative. It's not going to replace funding on concept, but it's an alternative that has a lot more promise than people think.”
“And I will tell you, we have scrubbed and scrubbed and scrubbed, and I don't believe there is an approach out there today that has a stronger ROI – return on investment – than the bill that John and I have offered.”
The essence of the MAA is that it creates $180 billion in bonding authority along with $45 billion in tax credits for state and local governments. This, the legislators believe, will stimulate infrastructure development using public-private partnerships (PPPs; P3s) to maximise leverage on public spending power without creating too much federal government oversight.
“The majority of infrastructure in America is built at the state and local level and financed in the municipal, tax-exempt bond market. That market has built over $3 trillion worth of infrastructure. The problem is that market doesn't work very well for the private sector because of the tax code,” Wyden said. “So what the two of us have proposed is making those kinds of changes, building on what works.”
Hoeven, explaining the logic behind the legislation further, said: “In some cases, the ability to provide additional funding through bond financing is very important. But in some cases, you want to attract those private entities into the project with some equity.”
“So we offer the opportunity, it's $180 billion in bond financing for states that want to use that and it fits for them, but it's also $45 billion in tax credits that actually help create equity and help draw in those private sector partners in cases where you're trying to use a P3 for those projects.”
According to estimates provided to him by the Senate's Joint Committee on Taxation, for every $8 billion in investment using credits created under this act, the country could leverage $226 billion worth of infrastructure projects, greatly reducing the deficit the nation faces today.
“This is a one-two punch that is fresh, affordable, debt finance, and giving additional equity for investment opportunities through the tax credit, and of course, people can sell those. There are plenty of options,” Wyden pitched, with Hoeven positing: “This is a concept whose time has come.”