From day one, President Biden has made clear that addressing America’s infrastructure challenges will be a high priority for his administration. We fully agree that fixing our ailing infrastructure should be Job One for the 117th Congress, but tackling it will be no small task.
The nation faces a $2 trillion infrastructure funding gap over the next 10 years, meaning that planned investments are $2 trillion short of what is needed to maintain, modernize, replace, and upgrade our infrastructure. Improving our systems will need to go beyond a simple financial investment. Preparing our nation’s transportation, water, energy, and broadband networks for the future will require a transformation in how we plan, fund, and build infrastructure across the country. With state and local governments struggling to tackle long-deferred maintenance projects, let alone invest in new infrastructure or harness burgeoning technologies, the scale of this problem can seem insurmountable. Big problems require big ideas.
The Bipartisan Policy Center has identified six transformative solutions that, taken together, can address the funding gap and position the United States for the future, while also garnering bipartisan support:
- Transition to a sustainable dedicated revenue source for transportation. The per-gallon fuel taxes that currently flow into the federal Highway Trust Fund can no longer support the necessary level of investment, due primarily to increasing fuel efficiency and the rising costs of infrastructure construction and maintenance. The HTF requires a new revenue model that can keep up with future funding needs while maintaining the user-pay, user-benefit principle that underlies the Trust Fund concept. The following steps will enable the federal government to successfully transition to this new model: (1) enact one last increase in fuel taxes to address near-term funding needs; (2) strengthen the user-pay, user-benefit model to ensure that costs and benefits are fairly allocated across transportation system users; (3) promote the transition to a vehicle miles traveled fee by mandating more state and regional pilots; and (4) restore congressionally directed spending in a transparent and accountable manner to help make the benefits of federal transportation spending more clear to constituents. This roadmap toward a sustainable future for the HTF is both politically viable and fiscally responsible.
- Make critical investments to decarbonize infrastructure and promote resiliency. The scientific consensus is that the U.S. must rapidly decarbonize to avoid worse climate-related impacts than those already underway. These efforts can, and must, begin now, with faster deployment of existing low-carbon technologies. For example, the entire U.S. wastewater sector could reduce electricity-related emissions by nearly 40% by upgrading to high efficiency and optimal speed pumps. Federal infrastructure legislation should also help to expedite transitions to new technologies by adopting the permitting and project development reforms, discussed later, and by providing robust federal funding and financing for electric vehicle charging infrastructure, energy-efficient street lighting, and other low-emission technologies and investments across infrastructure sectors.
- Authorize direct payment bonds to bring new investors to the table. The federal government has several programs designed to provide state and local governments with access to low-cost financing for infrastructure projects. Yet a new direct payment infrastructure bond would attract new investors, support a wide range of public and privately developed projects, and give governments another tool in the toolbox. Direct payment bonds offer a new product—a taxable bond for which the issuer receives a direct payment from the federal government to help offset the higher interest costs, or the buyer receives a federal tax credit equivalent to a percentage of the interest owed. Unlike traditional municipal debt, direct payment bonds are attractive to investors who do not have federal tax liability, such as pension funds. The new bond would complement other federal financing options, such as TIFIA, WIFIA, and private activity bonds, which should also be expanded to support additional projects.
- Deliver projects faster through additional permitting reform. Unnecessary delays in the approval process costs money for both the public and private sectors. Direct costs of a project can increase dramatically if the cost of materials, supplies, or labor rise during a delay. There is also a public cost to delaying needed improvements—for example, older facilities generate more emissions and often require more frequent and costly repairs. The environmental review and permitting process can be improved by expanding use of the federal government’s permitting dashboard, requiring federal agencies to conduct reviews simultaneously, and delegating additional responsibilities to states. Moreover, Title 41 of the FAST Act, which created the Federal Permitting Improvement Steering Council, an interagency council empowered with new tools and resources to improve the timeliness, predictability, and transparency of federal project approvals, should be reauthorized rather than sunsetting in 2022, as called for in current law.
- Break the cycle of deferred maintenance. The poor condition of our nation’s infrastructure is the result not only of inadequate investment, but also of challenges faced by state and local agencies in prioritizing the right investments at the right times. Many public agencies lack a comprehensive overview of their assets’ current conditions and the projected costs of future repairs and replacements. In some cases, agencies do not have a complete list of the assets they own, inhibiting their ability to make strategic decisions about how and where to deploy their limited funds, and masking potential opportunities for innovative solutions. As part of required certifications for federal infrastructure funding or financing, applicants should demonstrate that they are using best practices in asset management, life-cycle cost accounting, and project selection. The federal government could support state and local agencies in adopting these practices with a new capacity-building program for federal grantees.
- Encourage public-private partnerships to engage private capital and transfer risk. Public-private partnerships or P3s can be a key tool for state and local governments to address overwhelming infrastructure needs. The public sector should not be expected cover these costs alone. Private sector partners can bring an appetite for risk, necessary capital, and valuable expertise to a project. Investors with hundreds of billions of dollars to deploy are actively seeking infrastructure projects to support. P3s are not the right model for every project, but under the right conditions, a P3 can deliver a cost-effective and better performing project. They can also be well-suited to advance climate-related goals because contracts can include incentives and enforceable benchmarks for a private partner to deliver a particular outcome, like reduced emissions. Applicants for federal funding or financing should be required to demonstrate that they have evaluated all delivery options, including P3s, to determine which would provide the best value for taxpayers over the lifecycle of a project.
To learn more, here are additional resources from BPC on: