COVID-19 a blow to chances of long-term infrastructure bill
An infrastructure bill is unlikely to happen this year as attention has shifted to solving the COVID-19 crisis.
Muni market groups are persistent in getting muni bond provisions included in COVID-19 stimulus bills, but infusions of cash for airports and transit agencies in that legislation won’t be a substitute for the stability of long term financing, experts say.
“I don’t believe Congress has the time right now to include anything else infrastructure-related in the stimulus bill,” said Adie Tomer, a fellow at the Brookings Institution.
“They can’t just attach a five-year infrastructure bill to this,” Tomer later said. “There isn’t enough consensus on that five-year approach between the House and the Senate and there’s just not enough time to debate it.”
A Senate GOP bill was introduced last week, marking Congress’ third stimulus bill. The $1.6 trillion bill would provide financial aid in the form of grants to airports, transit systems and Amtrak.
There is likely to be a fourth stimulus bill. As of Tuesday morning, the third stimulus bill was still being negotiated.
If the economy stabilizes and leaves behind low-interest rates, Tomer believes there could be an appetite for an infrastructure bill. However, lawmakers could go to the other extreme if economic uncertainty continues. Then Congress would have no appetite for an infrastructure bill, Tomer said.
“If we don’t have recovery by September, like really confident economic footing, I can’t see there being an infrastructure bill,” Tomer said.
Whether it’s called stimulus or an infrastructure package, that will be muni advocates’ next focus, said Emily Brock, director of the Government Finance Officers Association’s federal liaison center.
“It’s all kind of part of the same at the moment,” Brock said.
Brock wants to continue pushing for the restoration of tax-exempt advance refunding and an increase in the cap for bank-qualified debt in future stimulus bills.
In the third stimulus bill, public finance groups are pressing for clarity on lawmakers’ plans for muni bond market assistance.
Democratic Sen. Robert Menendez of New Jersey proposed the inclusion of his Municipal Bonds Emergency Relief Act in a stimulus bill, which would authorize the Federal Reserve to purchase municipal debt to help state and local governments finance public services to cope with the coronavirus health emergency.
Current law largely precludes the Fed from buying munis except those with maturities of under six months, and it has been historically hesitant to wade into the muni market as a buyer of last resort during difficult financial times.
The House introduced a $2.5 trillion stimulus bill on Monday. It would provide direct payments of $1,500 to individuals and expand paid family and medical leave. Most importantly, for the muni bond market, it would require the Federal Reserve to stabilize the market and provide additional financial aid to state and local governments.
A future infrastructure package looked more probable just a few months ago.
In January, House Democrats proposed reviving Build America Bonds and restoring tax-exempt advance refunding in a $760 billion five-year infrastructure plan. In July, the Senate Environment and Public Works Committee passed The America’s Transportation Infrastructure Act, a $287 billion five-year surface transportation authorization.
Both bills do not have a financing package set up yet.
As of March 4, Sen. John Barrasso, R-Wyo., chairman of the Senate committee said the time to pass that legislation was at hand.
A long-term infrastructure bill will not be included in a stimulus package, said Baruch Feigenbaum, assistant director of transportation policy at the Reason Foundation.
“Any funding is going to be focused on short-term operations,” Feigenbaum said.
The Highway Trust Fund is going to need massive funding and with fewer people driving due to the virus, it will exacerbate that problem, Feigenbaum said. The HTF has been bleeding money for years since it’s funded through gas taxes. Gas taxes haven’t risen on a national level in decades.
Feigenbaum predicts that Congress will reauthorize HTF and along with that the Fixing America’s Surface Transportation Act. The FAST Act is set to expire Sept. 30.
A reauthorization of the FAST Act could be included in one of the stimulus bills, said Susan Howard, program director for transportation finance at the American Association of State Highway and Transportation Officials.
“We could see some action on it much quicker because of COVID-19 if there is a desire to do some infrastructure investment in the next round of COVID-19 response,” Howard said.
Otherwise, Howard does not see long-term fixes for infrastructure happening in the near future. Howard believes there will be more focus on getting through the crisis and pumping money into certain areas of the economy.
Howard believes there could be some interest in a response similar to the American Recovery and Reinvestment Act response during the previous recession. ARRA provided $48.1 billion in funding for transportation infrastructure in 2009, which caused a ramp-up in spending.
“There could be direct appropriations of highway formula dollars to states,” Howard said. “What that would do would really help relieve some of the fiscal burdens on states with federal money essentially. We need more money in the economy moving around right now.”