WASHINGTON – State and local governments can issue private activity bonds or sell off their assets to raise funds to obtain revenues for incentive grants for infrastructure projects, two cabinet officials told lawmakers on Wednesday, drawing the ire of some Democrats.

“We’re agnostic to the [financing] methodology,” DOT Secretary Elaine Chao said during a Senate Commerce Committee hearing on infrastructure.

She was responding to Sen. Bill Nelson, D-Fla., who had asked how the Trump administration expects cash-strapped states and localities to come up with the majority of revenues for infrastructure projects.

President Trump’s infrastructure plan proposes $100 billion over 10 years for incentive grants in which state and local governments would find a revenue stream for infrastructure and pay 80% of project costs, with the federal government paying only 20% of the costs. This formula is opposite the 80%/20% federal-to-state formula that traditionally has been used for highway projects.

Commerce Secretary Wilbur Ross said there could be a “recycling of assets owned by state and local governments but not in use” when asked about the lack of available state and local funds by Sen. Tammy Duckworth, D-Ill.

U.S. Transportation Secretary Elaine Chao
U.S. Transportation Secretary Elaine Chao said the administration is "agnostic" to the financing methodology that state and local governments use to obtain revenue for infrastructure. Bloomberg News

The responses frustrated Democrats who said state and local governments just don’t have the money.

“You say debt. We still have to pay for it,” said Sen. Gary Peters, D-Mich. “This is just smoke and mirrors. I think the whole plan is de minimis help.”

Duckworth said at the same time the president is proposing to spend $200 billion for infrastructure over 10 years for infrastructure, his budget proposes to slash $345 billion from infrastructure programs.

“If the president is serious about rebuilding infrastructure, why does everything he does move away from that goal?” she asked.

Nelson, suggesting the administration could have paid for infrastructure in its tax bill asked, “Could we not bring [the corporate tax rate] down 10 [percentage] points to 25% and use that additional revenue for infrastructure?”

Sen. Jon Tester, D-Mont., said the president infrastructure plan “makes for a great press release” because it sounds like he’s proposing spending $1.5 trillion, instead of leveraging $200 billion to get that amount. “Montana is cutting programs right now because they don’t have the money,” he said.

All of the department secretaries, which also included Alexander Acosta from Labor, Sonny Perdue from Agriculture, and Rick Perry from Energy, told committee chairman Sen. John Thune, R-S.D. that they were committee to getting bipartisan support. But Rep. Catherine Cortez Masto, D-Nev., noted no Democrats were involved in developing the president’s plan.

Meanwhile, Chao had a testy exchange with Sen. Richard Blumenthal, D-Conn., when he tried to get her to commit to, or urge the president to support, providing federal assistance to the $13 billion Gateway project, which would connect New Jersey and Manhattan through train tunnels.

“A campaign is being waged in the public arena to bully the department to pressure the federal government to fund these projects,” Chao charged.

She said Gateway is “a nickname” for nine separate projects. “These projects are unusual in their unwillingness to follow the process like other states.”

“They did not come up with a realistic financing plan. There’s no application,” she said when Blumenthal continued to press her.

The project has become a political football, with state officials contending they had funding reassurances from Obama administration officials and Trump not wanting to help a key project that would benefit Senate Minority Leader Chuck Schumer, D-N.Y.

Chao said her department is working on permit reforms required by last two transportation bills, but that they would not span across the agencies as would Trump’s proposed reforms.

Ross said Commerce is working on ideas for transformative projects like satellite-based broadband and commercial spaceports.

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