Municipalities look to federal government to reliably fund infrastructure during pandemic

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Municipalities need federal help to get reliable transportation funding, especially during a pandemic, though a long-term infrastructure bill seems unlikely to pass before the end of the year.

During a U.S. Senate Committee on Environment and Public Works hearing Thursday morning, Sen. John Barrasso, R- Wyo., chairman of the committee touted his surface transportation bill and highlighted a need for consistent federal funding.

However, a surface transportation bill seems unlikely to pass by the time highway funding runs out in September.

“It’s still fairly unlikely that we’re going to see a multi-year reauthorization this year,” said Marc Scribner, senior transportation policy analyst at the Reason Foundation. “Congress has a lot on their plate right now and the House and the Senate have different approaches.”

The Highway Trust Fund, which has been bleeding money for years, expires on Sept. 30. The HTF relies on gas taxes, which have been falling over the years due to the proliferation of more fuel-efficient and alternative-fuel vehicles. Both the Senate and House have passed separate bills to fund the HTF, which the Congressional Budget Office has projected will be insolvent by as soon as next year.

Some have said due to attention shifting over to COVID-19, that a long-term infrastructure bill is unlikely to pass and it would be more likely that the HTF would just be reauthorized.

Municipal bond participants hope that a future infrastructure bill would include much hoped-for bond provisions, such as a new direct-pay bond program and an increase in the bank-qualified cap.

House Democrats proposed a bill on Wednesday to provide $494 billion over five years for surface transporation and rail. That bill does not have bipartisan support.

In comments to the House’s recent bill, the Securities Industry and Financal Markets Association said it was critical to close the infrastructure financing gap.

“One obvious tool with immediate impact would be the reinstatement of advance refunding, allowing state and local governments the ability to free up borrowing capacity at extraordinarily low interest rates for new investments in infrastructure and other important public projects.” wrote Kenneth Bentsen, SIFMA’s CEO and president, in a statement.

Earlier this year, House Democrats released a larger infrastructure framework of $760 billion over five years. That policy prescription would restore Build America Bonds and advance refunding. It would also expand the use of qualified private activity bonds, among other provisions.

The Senate Environment and Public Works Committee unanimously approved a bill almost a year ago to authorize $287 billion in federal surface transportation spending over five years.

Neither chamber has found a way to pay for their infrastructure bill. In the House, that jurisdiction is under the House Ways and Means Committee which will have to come up with a way to pay for the bill.

Barrasso criticized the House’s bill, saying House Republicans were cut out of the process.

Sen. John Barrasso, R- Wyo., chairman of the Senate Committee on Environment and Public Works passed a surface transportation bill last summer.

“Leaders in the House should look to America’s Transportation Infrastructure Act as a bipartisan model,” Barrasso said in a statement sent to The Bond Buyer. “Infrastructure legislation is critical to our economic recovery and it must help the entire country, not just select urban centers. The only way for that to happen is bipartisanship.”

For the House’s bill, much of the money would need to be funded through the HTF, Scribner said.

“The problem is finding that money and if Ways and Means were to take that bill and say we want to provide enough funding soley through fuel taxes, they would need to double the gas tax in order to pay for it,” Scribner said.

So it would be unlikely for lawmakers to consider doubling the gas tax in a pandemic before elections in November, Scribner added.

During the hearing, Barrasso said temporary funding extensions are challenging for states and local governments.

“Our committee has repeatedly heard expert testimony that month-to-month extensions make it harder for states and communities to plan,” Barrasso said. “In the past, funding uncertainties from such short-term extensions have led to project delays, cancellations, and higher costs. These delays would hurt our economic recovery.”

Sen. Tom Carper, D-Del., said it was important now to invest in infrastructure and is a way for the country to recover from the pandemic. He added that the committee’s America’s Transportation Infrastructure Act passed last summer was a good start.

A witness during Thursday’s hearing, Dr. Doug Holtz-Eakin, president of the American Action Forum said motor fuel taxes, like gas taxes just won’t work anymore to fund infrastructure. A vehicle miles traveled tax, would make more sense, he said. However, those taxes should not be raised in 2020.

“I don’t think you should raise taxes in 2020, and I’m not even sure about 2021,” Holtz-Eakin said. “This is not the right time to provide additional headwinds to the economy.”

Though Sen. Carper agreed that 2020 was not the right time to raise taxes, but that they should start “turning up the dimmer switch” in 2021.

“Unfortunately, everybody says we need to invest in transportation infrastructure, almost never do I hear anybody say, this is a time to do it — it’s always around the corner,” Carper said.

This all comes as state and local governments have struggled through a pandemic and recent protests have created challenges. Many across the world are reeling from a video showing the death of George Floyd in May in the hands of police.

Stability in knowing what governments’ outlook is important right now, said Greg Fischer, mayor of Louisville, Kentucky and incoming president of the U.S. Conference of Mayors.

The city furloughed about 400 people, and without help from the federal government, he expected 600 to 800 more to lose their jobs. Sixty percent of the city’s budget is made up of first responders, Fischer said.

“So the people that we are asking to help us get through the pandemic and now keeping peace in our streets, their jobs are now at risk,” Fischer said. “To send that kind of message in today’s environment just kind of boggles the imagination.”

For now, Louisville can use its rainy day fund, Fischer said.

“Cities across the Amercia desperately need a signal from the U.S. Senate and all of Washington that help is on the way, here is what it looks like, so that we can keep our cities running,” Fischer said. “If we can’t keep our city government running, our economy is not going to come back. It was tough enough with the pandemic, but now with civil unrest, we just can’t afford to be laying people off.”

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