WASHINGTON — President Obama should seek federally-subsidized infrastructure bonds, a national infrastructure bank, and standardization of state tolling authority to help accomplish his infrastructure investment goals, the Center for American Progress said in a new report.
“On the campaign trail, the president repeatedly called for the federal spending saved by ending the wars in Afghanistan and Iraq to be directed to infrastructure to support “nation-building right here at home,” co-authors CAP researchers Donna Cooper, Keith Miller, and John Craig wrote in the report, which was released earlier this week.
“For the president to accomplish his infrastructure strategy goals, additional reforms that mobilize more private investment in infrastructure are necessary,” they said.
Public-private partnerships are appearing more and more in the U.S., as state and local governments increasingly turn to private investors to help develop infrastructure projects where identifiable revenue streams exist. Roads and bridges are now commonly built as P3s.
But despite the enthusiastic embrace P3s have received in states like Virginia and Indiana, inefficiencies in the municipal bond market and the lack of a standard and easily-understood process for matching good P3 candidate projects with willing investors hampers efforts at rebuilding the national infrastructure, the think tank said.
A recent Office of Management and Budget study estimated that not collecting taxes on interest from muni bonds would cost the federal government $230.4 billion between 2012 and 2016.
“If tax-exempt municipal bonds were the most efficient way for the federal government to subsidize infrastructure spending at the state and local levels, these losses could be considered a justifiable expense. Unfortunately, this is simply not the case,” the report asserted.
Munis frequently have too short a maturity and favor wealthier investors, according to the report, which recommends a program similar to the Build America Bonds Program created in 2009, but with a 28% federal subsidy.
“The 28% mark is the ‘revenue neutral’ subsidy level, or the level at which the projected federal cost of subsidizing such bonds is offset by a reduction in tax-exempt bonds and their cost to the federal government, according to the U.S. Treasury,” the group said. A national infrastructure bank, an idea previously floated by the Obama administration and in bills sponsored by lawmakers that failed to gain traction in Congress, could help solve issues caused by “limited communication between programs and the limited availability of funds in individual programs” the report concluded.
“An infrastructure bank would be particularly effective at leveraging additional private investment because it could help inexperienced states and localities structure viable and attractive public-private partnerships and would promote best practices at all levels of government,” the report said.
A national bank would have more lending capacity than the existing Transportation Infrastructure Finance and Innovation Act loan program, which some lawmakers have said makes a national infrastructure bank unnecessary.
The president should also work to expand the ability of states to toll interstate highways, the report recommends. Though some progress has been made on this issue, with Missouri, Virginia, and North Carolina involved in interstate tolling pilot programs, more needs to be done, the report concludes.
“While tolling should not be used in every instance where significant revenue could be raised, the potential revenue from new tolling facilities has been estimated at more than $100 billion annually,” the group said.
The report acknowledged that while encouraging P3s, policymakers should take care to protect the public interest with strong federal oversight.