To a chorus of skeptics, on 12 February 2018, the White House released its long-awaited “Legislative Outline for Rebuilding Infrastructure in America” (Plan). The Plan calls for a multi-pronged approach that envisions USD 200 billion in Federal funding with direct grants and improvements to existing financing programs, infrastructure program and regulatory process improvements, and the expansion of workforce development programs. The Administration essentially calls for greater state and local funding and control over infrastructure and encourages Congress to open the door to public-private partnerships (P3s) for US infrastructure projects, including transportation (e.g., airports, ports, highways, mass transit, rail), rural infrastructure (e.g., broadband, tribal, territorial infrastructure), water infrastructure, and environmental projects. Although low-cost programmatic and regulatory changes may be more attainable, the Administration likely will face difficult negotiations as it tries to remove statutory impediments to P3s or increase Federal spending beyond current Congressional budget agreements, which already exceed spending caps. The Plan relies heavily on leveraging dwindling state and local treasuries, but holds promise in addressing critical infrastructure needs.
Funding & Financing of Infrastructure Projects
The Plan includes USD 200 billion in Federal funding, USD 100 billion of which will be available in direct grants administered by the DOT, US Army Corps of Engineers, and the EPA. A wide range of eligible projects—including airports, passenger rail, flood control, waste and water facilities, and environmental sites—will be selected based upon the project’s value, non-Federal revenue, efficiencies, use of new and evolving technology, and economic and social returns on investment. A Federal grant will be limited to 20% of new revenue for a project. The remaining USD 1.5 trillion of infrastructure investment under the Plan is expected to come from stimulation of non-Federal funding (i.e., state, local, and private investment). Considering the breadth of the Plan’s projects and the extent of US infrastructure issues, it is unclear whether the Plan’s direct funding alone would have the necessary sea change impact within a particular infrastructure sector, such as highways or airports.
The Administration has also asked Congress to improve infrastructure financing programs that will amount to USD 20 billion in incentives. Existing credit programs—such as funding under the Transportation Infrastructure Finance and Innovation Act (TIFIA), Railroad Rehabilitation and Improvement Financing, and Water Infrastructure Finance and Innovation Act (WIFIA)—would be expanded to cover additional infrastructure projects. For example, TIFIA would be expanded to include port and airport expansion projects. Limitations to these programs, such as the lending limit under WIFIA, would also be removed.
The Plan also envisions expanding private activity bonds (PABs) to more projects and private investors, leveling the playing field between public sponsors and private investors, while requiring projects to have a public nature and attributes, with rates charged for services or use subject to regulatory or contractual control. PABs’ tax-exempt status would also be preserved, and they would be expanded to certain privately-owned projects and longer-term leases and concession arrangements for more types of public-purpose infrastructure. The Alternative Minimum Tax, state volume, and transportation volume caps in PABs will also be removed.
The Federal government would change its land and real property management to pay for the Plan, including by divesting assets that would be more valuable to the public after sale, including Ronald Reagan Washington National and Dulles International Airports, Tennessee Valley Authority (TVA) transmission assets, and the Western Area Power Administration’s transmission assets. The political support for any of these divestitures, however, is far from certain with early opposition; Congress must navigate around existing operating arrangements.
Each of these proposed changes likely will face significant Congressional hurdles. The increased spending from direct grants and reduced revenues from financing incentives will likely be a difficult sell to Congress, which has already faced extreme difficulty in reaching a budget agreement, combined with an increasing deficit arising from the 2017 tax cuts. The expansion of PABs may be less controversial, but the sale of federally-owned assets, including Dulles and the TVA, has historically been an unpopular proposal for both political parties. Bipartisan legislation has already been introduced by Sens. Cornyn (R-Tex.) and Warner (D-Va.) to raise the caps on PABs.
Infrastructure Program Improvements
The Administration calls for substantial changes to existing infrastructure programs and rules that would allow for increased state and local flexibility, private investment, and increased projects. For example, states would be given the flexibility to toll existing highways and small hub airports could use a streamlined process for passenger facility charges to fund development, similar to large hub airports.
The Plan also calls for a considerable changes in the FAA’s airport privatization pilot program (APPP). First, the Plan would remove the number and size of airports that can participate in APPP. Currently, only 10 airports are permitted to participate, with additional limitations on the number of airports that can participate by size (e.g., one large-hub airport). It also would decrease the percentage of airlines needed to approve privatization from 65 percent to a majority, which will reduce barriers and provide more flexibility for carriers to approve privatization. Yet, airlines are likely to oppose this change. More generally, the Plan also calls for limiting FAA oversight of non-aviation development activities, permitting the use of Airport Improvement Program (AIP) funds for incentive payments for accelerated project completion, and AIP oversight through post-expenditure audits in lieu of grant review and approval.
Many changes to US infrastructure programs could be made at relatively low costs, while increasing private infrastructure investments and relieving state and local treasuries from the burden of improving US infrastructure.
Permitting & Workforce Improvements
The Administration sets out regulatory and legislative changes that would reduce the administrative burdens associated with infrastructure development. This includes improving efficiencies and decision making at the Federal level for environmental reviews and permitting, expanding the delegation of authority to states in environmental reviews and right-of-way transactions, increasing pilot programs that address environmental impacts, and reducing environmental review litigation.
Educational and workforce development programs would see improvements to the accessibility of technical and short-term education programs, particularly for programs for skilled trades and apprentice certifications. It would also require states to accept out-of-state licensed workers, if the state accepts Federal funds for projects.