2018 is here and the Trump administration is expected to rollout a new infrastructure plan in the coming weeks.
The latest reports on the long-awaited plan describe a 70-page document outlining the administration’s principles, and a three-pronged funding and financing approach that will dedicate money to “rural infrastructure,” “transformative projects,” and a “state and local incentive program.” Projects eligible for the incentive program are expected to already have identified dedicated funding to cover at least 80 percent of project costs. These new principles and programs will be in addition to the administration’s year-long effort to streamline infrastructure permitting and environmental review.
As the administration puts the finishing touches on their proposal, and Congress prepares to craft legislation of their own, 2018 could be the year of infrastructure. In the spirit of the new year, we’ve compiled a list of “resolutions” that Congress and the administration should seek to achieve through an infrastructure bill.
Resolution #1: Continue to Accelerate Permitting
As with all resolution lists, it is easiest to start with something that is already being worked on. In 2015, Congress passed the FAST Act, which laid down a framework for the federal government to add more transparency, efficiency, and certainty to the permitting process. In 2017, through executive order and rulemaking, the Trump administration continued implementation of the FAST Act’s reforms and launched the “One Federal Decision” initiative.
Though significant progress has already been made toward this resolution, there are still several areas in the permitting process that Congress and the administration will need to address this year. Importantly, the new infrastructure bill must also align with—and not disrupt—the important work that has been done thus far.
Resolution #2: Build Capacity
One of the previously stated tenets of the Trump infrastructure proposal is to commit $200 billion in federal incentive funds to leverage upwards of $800 billion in new investments over the next decade from a combination of state, local, and private sector sources. That $800 billion target is an admirable goal, and lofty goals are a key part of any good list of new year’s resolutions, but goals are always more achievable when paired with a few action items.
Under the currently rumored outline, this $800 billion goal appears to fall under the “state and local incentive” program and perhaps the “transformative projects” program. One of the options for projects to qualify for the incentive fund could be through the creation of public-private partnerships. Public-private partnerships, or P3s, fell in and out of the Trump administration’s favor over the course of 2017, but are still a valuable vehicle to modernize the country’s infrastructure and leverage private capital. But today, P3s only represent a fraction of the current infrastructure portfolio, in part because local governments may lack the resources or expertise to identify potential projects and partners. Under the current federal, state, and local programs, experts estimate there will be just $15 billion in new P3 infrastructure investments in 2018.
To reach the $800 billion goal, the 2018 infrastructure plan should take a few concrete steps towards increasing the capacity for state and local leaders to develop new projects (for both P3s and traditional projects), and navigate often cumbersome federal application processes. As was recommended in BPC’s report Putting Private Capital to Work in Rural Infrastructure, the federal government could increase these capacities by providing technical assistance, predevelopment funding, a clearinghouse of best practices, and designated agency liaisons—in addition to improving and expanding the existing federal “capacity building” efforts, such as USDOT’s Build America Bureau and USDA’s Circuit Rider Program for rural water systems.
Resolution #3: Promote Better Asset Management
Improving asset management practices around the country would be a productive housekeeping goal for the 2018 infrastructure plan. Modern asset management practices such as life-cycle accounting and asset inventories will help create savings and lead to better infrastructure projects.
Life-cycle accounting is exactly what it sounds like: accounting for all costs over the entire life of a project, rather than just the initial cost of construction. Too often, public projects undervalue the future obligations tied to a project, failing to account for maintenance or the possibility of the infrastructure failing prematurely. This can come in the form of small decisions as well as big ones. For example, railcar upgrades on the Washington, D.C.-area metro system have been, in part, driven by an understanding of life-cycle costs; disintegrating carpet floors that required constant upkeep were replaced with more resilient vinyl/plastic flooring. Such decisions are made to extract greater value out of an infrastructure investment and improve service for the public. Life-cycle accounting can improve how projects are developed in the first place, encouraging projects to consider using contracts that interconnect the design and building costs with the eventual performance and maintenance of the asset.
Most public agencies, including the federal government, lack a comprehensive overview of the condition and long-term needs of their infrastructure. Maintenance is often paid for as needed (if at all), and buried assets, like pipes and transmission lines, may only be discovered when something fails. An asset inventory is a living database of all the infrastructure assets that are owned or maintained by a particular government. When combined with life-cycle accounting practices, these inventories can track deferred maintenance and estimate future infrastructure needs, allowing officials to plan and prepare accordingly, across all asset types. The District of Columbia has recently assembled a new asset inventory that has registered 96 percent of the district’s infrastructure assets, tallying a running list of the maintenance costs and unfunded infrastructure needs.
Between federal, state, and local sources, public spending for water and transportation infrastructure totals around $400 billion per year. As the 2018 infrastructure plan dedicates new resources, the final package should incorporate life-cycle accounting and asset inventories to assure that the money is being spent on long-term solutions, rather than short term fixes.
Resolution #4: Improve Financing Mechanisms
Last year’s infrastructure principles included a commitment to expanding infrastructure financing tools like Private Activity Bonds. The new Tax Cuts and Jobs Act retained the tax-exempt bond market as a viable infrastructure financing mechanism, but that debt may become more expensive under the new tax code. Meanwhile, the federal government also operates a series of financing programs for infrastructure projects, the largest of which are the TIFIA and WIFIA programs. The TIFIA and WIFIA programs, which are named after their respective pieces of legislation, the Transportation Infrastructure Finance and Innovation Act and the Water Infrastructure Finance and Innovation Act, provide low-interest loans, loan guarantees, and lines of credit. TIFIA focuses on surface transportation projects like highways, bridges, and transit, while WIFIA finances drinking water and wastewater projects. These financing programs provide localities with an alternative option to the traditional debt financing approach.
The TIFIA program, created in 1998, has financed nearly $30 billion in surface infrastructure projects, and estimates project that the federal government will recoup 99.9 percent of its issuance. Last year the WIFIA program, in its first year of operation, selected 12 projects to receive a combined $2.3 billion. The 2018 infrastructure plan should expand the existing financing mechanisms. Additionally, expanding Private Activity Bonds and offering a new form of direct payment bonds, such as the 2009 Build America Bond, could attract new capital for both traditional projects and public-private partnerships.
Resolution #5: Get Started
The roads, water systems, ports, airports, and energy grids in the United States are falling behind, while basic access to the internet remains inaccessible to millions of Americans. There is an obvious need for a new infrastructure plan in 2018, but the success of that plan will largely depend on the commitment of both Congress and the Trump administration to create a substantive, inclusive, and bipartisan package that will begin to address the country’s multi-trillion dollar infrastructure funding shortage. There is a long list of priorities in Washington this year, and getting started on fixing the country’s infrastructure must be one of them.