Whatever you think of President Obama, you gotta admit one thing: He’s a public works champion. He’s consistently tried to relieve the incredible financial mess caused by the mortgage meltdown by fixing the nation’s aging roads, bridges, and water and sewer systems.
He’d barely moved his wife and daughters into the White House before signing the American Recovery and Reinvestment Act in 2009. The law threw roughly $800 billion at infrastructure and added Build America Bonds to the financing options available to public water, road, building, and environmental agencies.
Those bonds generated at least $181 billion in project spending, but beyond that no one has a single, grand-total figure for how much infrastructure construction and repair. But even if were twice what those new bonds did, it was like fixing a broken arm with a Band-Aid instead of a cast.
The American Society of Civil Engineers estimates that the nation’s drinking water systems need $1 trillion over 25 years, stormwater and sewer systems need almost $300 billion, and roads and bridges almost $200 billion.(Download the free updated Report Card app with 20 new case studies here).
So in July 2014, he announced the Build America Investment Initiative: more ways to facilitate public-private partnerships between federal, state, and local governments and private investors.
“Private capital isn’t a substitute for public investment,” the White House said in a fact sheet outlining the plan. “But the president will continue to do whatever he can to promote economic growth where there is need or opportunity. And right now, there’s a real opportunity to put private capital to work in revitalizing U.S. infrastructure.”
More details were provided during his State of the Union address on Jan. 20:
TWO NEW THINGS FOR WATER SYSTEMS
Water Finance Center at EPA. The federal water bill that was reauthorized last year included a new financing program modeled on U.S. DOT’s Transportation Infrastructure Finance and Innovation Act (TIFIA).The Water Finance Center will work with municipal and state governments, utilities, and private groups to use federal grants to create models that can be replicated in other areas across the country.
USDA’s Rural Opportunity Investment Initiative. The general media have focused on the broadband elements of this $10 billion program, but funding’s also for water and sewer projects.
ONE NEW THING FOR all PUBLIC WORKS
The Qualified Public Infrastructure Bond (QPIB) gives private investors the same advantages that public entities receive via municipal bonds. They could be issued to finance airports, ports, mass transit, solid waste disposal, sewer, water, roads, and bridges.
Unlike private activity bonds (PABs), QPIBs wouldn’t be capped or have an expiration date, and interest won’t be to the alternative minimum tax. They’re not expected to be available for privately owned facilities or to privatize public facilities.
“QPIBs would definitely provide a spark to start-up projects, advancing projects that might not have gotten off the ground otherwise,” Standard & Poor’s said in a press release. But “issuers could face downward rating pressure if they are unable or unwilling to maintain margins and liquidity levels.”
Here’s the fly in the ointment: Congress has to approve it.