WASHINGTON - The problems facing transportation infrastructure financing are so expansive that all options must be considered, including public-private partnerships and a possible alternative to the federal gas tax to fund the highway trust fund, JPMorgan's Jane Garvey said Sunday at a conference here.
In other remarks at the conference, which was sponsored by the International Bridge, Tunnel, and Turnpike Association, Marshall Crawford, a managing director at JPMorgan, said the credit crunch should make P3s much more attractive to state and local governments.
Garvey, head of U.S. public-private partnerships at JPMorgan, is a former head of the Federal Aviation Administration and top official at the Federal Highway Administration. She is a leader of President-elect Barack Obama's transition team for transportation and is considered to be at the top of the list of possible nominees to be secretary of transportation.
"The issues and problems are so huge that we are going to have to consider P3s and other options," Garvey said at the conference. But the first step is to get the economy moving with a stimulus package that provides financing for transportation projects that are ready to go, she said.
Garvey said that financing infrastructure projects has an "inherent link" to getting the economy moving.
"It is, in fact, an enabler , a way to think about stimulating the economy," she said, adding that there has been a transportation infrastructure "epiphany" in recent months. She expressed confidence that Obama will put financing transportation projects at the forefront of any economic recovery package.
Garvey warned that the highway trust fund, which provides grants to states for road and bridge projects, will likely dry up before Congress produces the next long-term transportation bill. The current bill - the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users, or SAFETEA-LU - will expire Sept. 30.
There could be another short-term infusion of money into the highway trust fund, which neared depletion in September until Congress authorized the transfer of $8 billion of general funds into it, Garvey said. But over the long term, she said there needs to be an overhaul of how the fund is financed because the current method of funneling revenue from the 18-cent-per-gallon federal gas tax into it will likely become obsolete as people drive fewer miles and buy more fuel-efficient cars. Garvey added that a possible alternative to the gas tax would be a vehicle-miles traveled fee.
While she acknowledged that P3s have not gained support from some political leaders and the public in general, she said they likely will become a viable option in the future when projects cannot be completed because of a lack of public funds. Politicians and the public will realize they "need some of those private dollars," she said.
If tapped by Obama to head the Department of Transportation, Garvey could face opposition from some members of Congress who have been skeptical that P3s can provide real benefits to state and local governments.
Rep. James L. Oberstar, D-Minn., chairman of the House Transportation Committee - who also has been considered for DOT but is unlikely to leave his current post - has adamantly opposed moving toward more private investment in infrastructure. He has supported an increase in the gasoline tax to help generate revenue for federal transportation grants.
But Garvey said it is "impossible" to think that the federal government will be able to supply the amount of grants to states that it has in the past. "Those days are over," she said.
Crawford, speaking after Garvey, echoed the sentiment that P3s will need to be an option for state and local governments.
Because monoline insurers have essentially become nonexistent, lower-rated issuers will have a harder time financing projects through debt because the bonds will be subject to higher interest rates. This could create opportunities in the P3 market, Crawford said.
"The impact of the credit crunch on state and local budgets is driving interest in asset monetizations or P3s," he said, adding that he expects "pretty big changes" in the public-private partnership market.