From Infra Americas News Service
How the Presidential Nominees’ Infra Plans Could Become Reality
by Michael Dunning
Both Hillary Clinton and Donald Trump have said that renewal of America’s infrastructure would be at the top of their agendas, if elected. Each would spend huge amounts to realise these ambitions. But how realistic are their plans and what role should the federal government play after a new President is elected?
Infrastructure has been placed high up on the agendas of both Democratic Presidential nominee Hillary Clinton and Republican nominee Donald Trump. That is a good sign for the industry but translating ideas on how to fund infrastructure projects into reality will require more than speeches. Clinton has announced that, if elected, she will invest USD 275bn in infrastructure over a five-year period. Donald Trump has claimed he would invest as much as USD 1trn.
Political blockages in Congress
The problem then, comes back to how to fund this new investment in infrastructure.
Marcus Lemon, former Federal Highway Administration chief counsel and chair of Polsinelli’s Infrastructure and PPP Group believes that the numbers are achievable in both candidates’ cases. but notes that there would be obstacles in terms of paying for the new investment, particularly getting congressional approval. A spokesperson for House Committee on Transportation and Infrastructure Chairman Rep. Bill Shuster said that any proposed legislation in a Republican-led House of Representatives must be paid for.
“A bill that isn’t will not get through the House. In addition, any tax-related measures must originate in the House.”
Cantor notes that the House has over the last eight years adhered to a policy of fiscal discipline without increasing the national debt.
“Any additional dollars would have to be counter-weighted on the spending side. But all the low hanging fruit has been harvested.”
State and local funding of infrastructure
An eight-year stalemate in Congress has led many states to fund infrastructure projects on their own.
“The real action is happening at state and local level,” says Dale Bonner, Executive Chairman of Plenary Concessions. “There are dozens of communities considering taxing themselves to raise funds locally to invest in major projects.”
New Jersey, for example, has recently raised its gas tax by 23 cents to pay for transportation projects.
In fact new tax initiatives are one of the major features of the state and local ballots come November, with around a half trillion dollars to be voted upon, much of which is being targeted for transit and highways projects.
“We need to create a landscape where the federal government is putting more tools in the toolbox for states to use.” “As these are local initiatives,” says Segal, “the dollars tend to be more focused with greater accountability. It is about locals taking control and not waiting for Congress to Act. And they are having real success generating new revenue streams at the local level.”
But there are some caveats to the idea that states and municipalities can take over the role from the federal government. Lemon points out that ultimately states can only do as much as the federal government allows them to do.
“We need to create a landscape where the federal government is putting more tools in the toolbox for states to use,” he says. “But different states need different tools.”
Aiello notes that one of the biggest problems with leaving infrastructure investment to states and municipalities is the unevenness in which infrastructure procurement and investment expertise is spread across the country.
“Certain states have built good institutional capacity but many states, county and city level governments, have not developed their capacity and investment in people anything like has been done at the federal level,” he says.
The role of the federal government
Bonner agrees that despite the increase in funding at the state and local level, it is not as simple as the federal government getting out of the way and letting states and municipalities get on with it on their own. At the same time, he says that he does not believe that the federal government should coordinate capacity building at the national level either, as it is better placed to help facilitate many of the programs in question.
“The states are part of a broader system, so there needs to be a coherence to certain types of investments, whether that’s the national freight system or state highway investments that should sync with local investments in transit,” he says.
He adds that the federal government still has a role to play in financing projects, thorough programs like PABs and TIFIA.
The federal government, as is clear from the plans from the Presidential candidates, still has a larger role to play when it comes to providing funds, and this is a crucial part of getting a much wider program of infrastructure renewal off the ground.
“The feds will always be an important partner,” says Segal. “The federal gas tax provides a baseline for states to build their programs around.”
However, Segal and others think that the prospects of a rise in the federal gas tax could be slim, despite calls from the U.S. Chamber of Commerce in 2014 to increase it.
There are important changes that could be made around how current funds are distributed to the states, which could make a big difference in helping the states and municipalities build capacity.
“The only way to get to the candidates numbers would be to move to more of a user pay system than we have now” Central to this, says Aiello, is to provide much more consistency when it comes to funding. He points out that the way this has been done in recent years has led to a lack of clarity for states.
For example, while the current five-year funding program restores some foundation for long term state capital project planning it was very unhelpful to go through the previous cycle of 30 day to six month to two year extensions of the federal program. This means no one knew how much and when federal funds might arrive at the state level, which makes it difficult for the states to plan their infrastructure programs and build the teams and capacity required to implement any kind of viable program.
Aiello and others have also cited other potential revenue raising schemes that could be coordinated at the federal level. One is lifting the prohibition on federal tolling.
“The only way to get to the candidates numbers,” says Lemon, “would be to move to more of a user pay system than we have now.”
Such a move could prove politically difficult, however, since the population and Congress to agree to tolling stretches of highway that were once considered “free” is not a vote winner.
Lemon believes that the way to get around this would be to encourage road users to see the highways in the same way they see utilities: “if you use it, you pay for it”.
In addition, says Lemon, the federal government could coordinate the introduction of a vehicle miles travelled (VMT) program. This he says, would be necessary for areas where tolling and P3s are less likely to work due to a lack of traffic and smaller revenue streams, and also help to pay for infrastructure upgrades in states that have a much smaller or more remote highway network. It would also mean that the revenues collected would be reinvested into the infrastructure from which they were collected, rather than being distributed to other areas of the transportation network that are not part of the highway system.
“Any type of regulation that provides for tolls should ensure that revenue received from a facility must go back into that facility,” says Lemon. “We should not be syphoning off revenues for transit or pet projects unrelated to highways because at that point we are then ‘robbing Peter to pay Paul.’”
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