Both U.S. presidential candidates’ sweeping visions encompass such diverse assets as water, energy, and broadband. Both transcend the Fixing America’s Surface Transportation (FAST) Act Congress passed last December, which provides $305 billion for road, bridge, and transit programs through fiscal 2020, an average annual increase of about 3% from current funding levels.
“It’s a good step in the right direction but more investment is needed,” says American Public Works Association (APWA) Executive Director Scott Grayson. APWA advocates a stable, dedicated revenue source and more support for local government agencies.
The candidates are on board with that.
In her proposal, Democratic candidate Hilary Clinton deems the FAST Act “a positive sign after years of gridlock and short-term patches” but “not nearly sufficient.” Within her first 100 days in office, she’d initiate legislation to increase federal infrastructure funding by $275 billion over five years. Source: unspecified business tax reforms.
Of these funds, $250 billion would go toward “direct public investment.” The remaining $25 billion would be allocated to a national infrastructure bank and leveraged to support up to $225 billion more. Total potential pot: $500 billion.
That’s still not enough, says Republican nominee Donald Trump, who called for “at least double her numbers” in an August 2 interview with Fox Business Network. That estimate echoes the figure he cites in Crippled America, where he describes infrastructure revitalization as a “trillion-dollar rebuilding plan.”
When asked how he’d pay for it, Trump said infrastructure bonds would enable private investors to take advantage of current low interest rates. As of this writing, he hadn’t released a formal proposal and his campaign didn’t respond to a request for specifics.
Bringing back another type of bond
Of particular interest to local public works agencies is Clinton’s pledge to reauthorize the Build America Bonds (BABs) program. According to U.S. Treasury Department figures, the program supported $181 billion in spending during its brief life span.
Introduced as part of the American Recovery and Reinvestment Act of 2009 to cut borrowing costs for state and local governments, the taxable municipal bonds carry special tax credits and federal subsidies. The securities broadened the investor pool and enabled agencies to lock in lower rates. But the BABs program expired at the end of 2010.
Bond administration would fall to the infrastructure bank, described in the plan as “a one-stop-shop” for states and municipalities seeking federal resources. The bank would be charged with:
- Attracting new sources of capital, such as pension funds, that don’t receive benefits associated with traditional tax-exempt debt.
- Leveraging funds by providing loans, loan guarantees, and other forms of credit enhancement.
Although Trump hasn’t spelled out his concept for infrastructure bonds, he supports tax, trade, energy, and regulatory policy reform. Such actions would create “new wealth,” some of which would go toward building “the next generation of roads, bridges, railways, tunnels, seaports and airports,” he said in an Aug. 8 speech at the Detroit Economic Club.
Highway Trust Fund up for grabs
There’s just one problem with proposals such as the BABs program and the infrastructure bank, says Dave Bauer, senior vice president of government relations for the American Road & Transportation Builders Association (ARTBA). Such financing tools can complement the Highway Trust Fund, but they can’t guarantee the fund’s ability to predictably distribute money states can use as they choose.
The 60-year-old trust fund is supported primarily via federal gas tax revenues, which haven’t kept up with need. Neither Clinton nor Trump have hinted at the politically unpopular solution: raising the gas tax, which has been static since 1993.
The FAST Act allowed for yet another in a series of “one-time transfer of funds to supplement existing … revenues without any path to establishing a real solution to the fund’s structural revenue deficit,” according to an ARTBA analysis.
When the measure expires in FY 2020, “the fund will again face a revenue crisis during the last year of the presidency of whoever wins,” says Bauer. “Unless Congress gets out in front of this issue, they’ll have to deal with it when they’re trying to get re-elected.”
On a more promising note, Bauer says the FAST Act’s passage “should signal to any candidate there’s more bipartisan support for federal infrastructure than other policy areas.”