MIAMI — The environment of austerity in the federal and state capitols will have a jarring effect on funding for transportation projects, but could present an opportunity for tolling, increased public-private partnerships, or an infrastructure bank, market participants said Monday at The Bond Buyer’s 11th Annual Transportation Finance Public-Private Partnership conference.
The incoming Congress, which will include enough Republicans to control legislation in the House and to block bills in the Democratic-led Senate, brings with it “a very, very different dynamic” with regard to federal spending, said Emil Frankel, director of transportation policy at the Bipartisan Policy Center.
Frankel predicted that lawmakers will not reach agreement on a new multi-year surface transportation bill or aviation reauthorization during the lame-duck session this year. Instead, the incoming Congress will have a tight window of six to eight months to approve such legislation before the next campaign cycle begins late next year.
“It’s likely to be a slimmed-down, shorter-term bill” than the previous six-year surface transportation authorization that technically expired last year but has been extended through Dec. 31, Frankel said.
He added in an interview that discretionary funds — which include earmarks — could be pared down but that just one senator wanting to protect a program or project could block such a move.
Nevertheless, lawmakers have been pushing for eliminating earmarks. President Obama, who campaigned on stopping earmarks, recently said he hopes for bipartisan agreement on changing the earmark system.
Regardless, the new House and Senate will need to fund transportation despite less-than-optimal revenues under the current funding system, which relies mostly on gasoline and diesel fuel taxes.
State, local, and federal spending on transportation spending combined is now $80 billion per year, instead of the $220 billion in annual spending that is needed, said Pennsylvania Gov. Edward G. Rendell at the event.
The current atmosphere for infrastructure investment “is just godawful,” Rendell said, noting that a dozen governors or governors-elect have signed no-tax pledges.
As for funding a new multi-year transportation bill, speakers ruled out a few different options that have been raised in recent months.
Frankel predicted the new Congress will not adopt a gasoline tax increase and will not support a transition from the gas tax as a funding source to either a sales tax on fuel or a mileage fee.
One option that a fiscally conservative Congress could consider is allowing states and localities to toll interstate highways, he said, though it could run up against opposition from various members of the House and from the trucking industry.
“The answer is the national infrastructure bank,” Rendell said, adding that his formula for improving investment and attracting private capital would include lifting the $15 billion cap on private-activity bonds and expanding a federal transportation loan program.
Another challenge, speakers noted, is the impending expiration of the Build America Bonds program on Dec. 31. The program, which provides issuers the option of a direct payment equal to 35% of interest costs when they sell taxable debt, has allowed governments to borrow at record-low rates.
While several speakers on Monday praised the program as a boon to issuers, they noted that it is not apparent whether Congress will extend the program.